In-line results; CFS reports healthy volume growth
GDPL reported EBITDA (Rail + CFS) of INR545m (est. of INR575m; +4% YoY, -4% QoQ) in 4QFY18. PAT (after minority interest) came in at INR194m (est. of INR204m; +1% YoY, +2% QoQ). Reported PAT is higher at INR327m due to INR322.5m of SIES income booked in 4QFY18 as part of rail income.
Rail margin continues to be under pressure
* Rail reported adj.EBITDA of INR331m (est. of INR325m; flat YoY, -5% QoQ), led by 2% YoY growth (flat QoQ) in container volumes to 58,908 TEUs. GDL improved its market share in NCR region by ~200bp in FY18, as against a loss of market share of ~300bp in the Ludhiana market. .
* Rail realization declined to INR32,432/TEU (-13% YoY, -2% QoQ), led by higher discounts. Hence, EBITDA/TEU fell 2% YoY (-5% QoQ) to INR5,619.
* Productivity of rail segment will continue to be impacted until end-FY19 due to higher turnaround time on account of ongoing railway capex at GDL’s key routes.
CFS witnesses healthy volume; Margins continue to be impacted
* Consol. CFS EBITDA stood at INR214m (+11% YoY, -3% QoQ).
* Consol. volume stood at 105kTEU (in line with est.; +15% YoY, +8% QoQ), led by healthy growth in major port volumes. Direct port delivery volumes have stabilized in JNPT at ~39% of overall volumes. However, the government is keen on increasing overall proportion of direct port delivery.
* Realizations stood at INR9,723/TEU (est. of INR10,709; -5% YoY, -3%QoQ), while EBITDA/TEU was at INR2,035 (est. of INR2,370; -4% YoY, -10% QoQ). Retention/TEU has declined due to increasing proportion of Direct port delivery volumes in JNPT CFS.
Valuation view: Our FY17-20 volume CAGR assumptions for Rail/CFS divisions stand at ~9%/10%. We value GDPL based on SOTP-based fair value of INR199/share, implying 20% upside, valuing the CFS business at 9x FY20E earnings, 40% stake in Snowman at 50% discount to market value, and Rail segment at 14x FY20E EV/EBITDA. The stock trades at 15x FY20E EPS of INR11.20 adjusted for the 50% stake of Blackstone in the rail subsidiary. Maintain Buy with a TP of INR199.
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