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Rail EBITDA performance provides DFC snapshot…

GDL’s Q4FY21 revenues grew 17% YoY to | 350 crore, led by 16% growth in the rail segment to | 255 crore and 20% growth in the CFS segment to | 96 crore. Rail volumes grew 15% YoY to 77772 TeUs and posted a record ~| 9926/TeU EBITDA performance. Subsequently, absolute EBITDA grew 48% to | 95 crore (led by EBITDA margin expansion by 566 bps to 27.2%). However, PAT grew 3x to | 47 crore as a stronger operational performance was further supported by lower depreciation and interest expense.

Rail business continues to drive profitability

DFC is expected to be connected to Pipavav port and Mundra port in Gujarat by CY21 end to early CY22, which should benefit CTOs like GDL in terms of higher volume growth. DFC is likely to enhance the operational metrics of CTOs with enhanced visibility on delivery time due to time tabled freight trains and higher share of double stacked trains enabling better operational efficiencies, among other triggers. The segment is witnessing stronger profitability owing to better turnaround time (EBITDA/TeU reached ~| 10000 levels in Q4FY21, partly supported by IR rebates on haulage charges for laden and empty containers). We expect GDL’s rail volumes to grow at a CAGR of 15% in FY21-FY23E and EBITDA/TeU to be in the range of ~ | 8200 -8600 over FY21-23E enabling a rail EBITDA CAGR of 13%.

Diversified segments expected to ride over current volatility

The management expects to improve its profitability in the CFS segment (lowered to ~2413/TeU in Q4FY21, ~3150/TeU in FY21), by executing more value added services, last mile logistics, etc. Also, the current volatility has the potential to again disrupt the port supply chain and create opportunities for higher realisation for CFS. The management also intends to expand pallet capacity in its cold chain business to 2 lakh in three years and has earmarked | 400 crore capex (via equity infusion and internal accruals). Snowman continues to grow strongly (20-25% growth) in its pharma, e-com vertical (managing back-end of Amazon warehouses).

Valuation & Outlook

The management expects the rail EBITDA to normalise at 8000-8500/TeU levels, going forward, and also, incur a capex of | 200 crore towards building two satellite feeder terminals in the NCR region (that would augment higher market share for GDL in NCR). Stable revenue growth and enhanced margins would translate into strong FCF generation (>10% yield in FY23E) and debt reduction (D/E: 0.2x in FY23E). We expect RoCE augmentation of 500 bps over FY21-23E to 17.3%. Gateway Distriparks stays a structural long term growth story in the logistics landscape. We maintain BUY rating on the stock with a revised target price of | 260 (19x FY23E EPS, earlier TP | 240).

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