Gateway Distriparks - Q2FY21 Results Review - Improving outlook. BUY - HDFC Securities

Mr. Aditya Makharia, Institutional Research Analyst, HDFC Securities

While Gateway Distriparks' (GDL) 2QFY21 EBITDA margin expanded 290bps to 24.9%, its results have been impacted by a higher tax charge, which led to a PAT of Rs 43mn (-75% YoY). We recently upgraded Gateway Distriparks to BUY, given its deleveraging initiative post the fundraise, simplification of group structure, and expectations of incremental volumes & efficiency driven by DFC. Our estimates for FY22/23E are mostly unchanged. Maintain BUY with an SOTP-based target price of Rs 125, at 8.5x Sep-22 EV/EBITDA for the rail business.

2QFY20 financials: GDL's revenue at Rs 2.6mn were -19% YoY, +4% QoQ due to 26/16% drop in CFS/Rail volumes. EBITDA margin at 24.9% surprised positively (+290 bps YoY) as the company is focusing on higher- margin rail cargo business and higher CFS dwell times. While PBT declined 4% YoY to Rs 152mn, PAT at Rs 43mn declined 75% YoY, owing to higher tax provision in 2Q (due to dividend received from GRFL).

Call and other takeaways: (1) Improving demand scenario: Freight activities are gradually reviving, and volumes are at 85-90% of pre-COVID levels. Management aims at achieving FY21 exit volumes at 90% of last year's levels. (2) Balance sheet deleveraging: Rs 1.15bn raised via rights issue has been used towards debt reduction. The company's net debt stands reduced at Rs 5.09bn vs 6.81bn in FY20. (3) Simplification of group structure: The company is restructuring operations by planning to merge the Rail/CFS segments, which will drive group synergies. After this restructuring process, GRFL would be listed and renamed later. (4) DFC commissioning timelines: Management believes that Rewari-Palanpur stretch will now commence by 1HFY22 vs the earlier guidance of Mar-21. This is due to pending technical signaling work on this route. (5) Snowman logistics: Capacity utilisation has risen by 300bps QoQ to 86%. Snowman will play an important role with COVID vaccines as it will require robust cold storage. Pharmaceuticals contribute 10% to its revenues, Seafood-24%, QSR-12%, Meat-12%, Others-42%.

Shares of GATEWAY DISTRIPARKS LTD. was last trading in BSE at Rs.92.35 as compared to the previous close of Rs. 90.3. The total number of shares traded during the day was 3716 in over 332 trades.

The stock hit an intraday high of Rs. 92.35 and intraday low of 88.9. The net turnover during the day was Rs. 337652.

Source : Equity Bulls

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