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Rail EBITDA up 52%YoY, 28%QoQ

Gateway Distriparks’ (GDL) Q4FY21 result witnessed higher than expected topline and EBITDA. Topline at Rs3.5bn was up 17% YoY (I-Sec 3.2bn) and EBITDA was up 48% YoY. Rail segment EBITDA/teu surprised with 32% YoY and 10% QoQ jump in EBITDA/teu to Rs9,926/teu. Increase in rail share for EXIM transportation continues to help players like GDL. Net debt continues to reduce from Rs4.9bn to Rs 4.4bn QoQ.

Management reiterated its plans to spend ~Rs2bn of capex for satellite terminals around NCR to help increase GDL market share. Advent of DFC (Rewari – Palanpur to Mundra and Pipavav ports) should complete by Mar 23 (as per management) allowing increased volume and operational tailwinds. We maintain BUY with SoTP-based revised target price of Rs232/share (earlier Rs 197/share)

* Rail EBITDA/teu up 52% YoY and 28% QoQ -- positive surprise mainly due to better than expected margin performance at Rs 9926/teu (I-Sec Rs 8574/teu) . This has positive implications for Concor as well. Rail volumes (teu) were up 15% YoY at 77,772teu (7.6% higher than expected). Management continues to guide for Rs8,000/teu EBITDA for rail business; provided volume driven operating leverage persists and the Indian railway rebate on laden and empty containers is withdrawn. Rebates introduced by IR has also helped margins in Q4FY21.

* CFS performance was lower than expected. Lower-than-expected EBITDA/teu at Rs2,412/teu against Rs2800/teu expected. CFS volumes were up 6.5% YoY while improving 10.5% QoQ. CFS revenues are up 20% YoY and 10.5% QoQ. We have considered a much lower EBITDA/teu trajectory for FY22/23E YoY. Yet, the current Covid induced disruption may again lead to surprise in margins for Q1FY22.

* Snowman; primed for a turnaround. Topline grew at 5% YoY. While warehousing segment reported nearly flat revenue YoY, EBITDA was up (high double-digit increase). Transportation EBITDA continues to drag. Management highlighted pharma and e-commerce revenues are growing at 20-25%. Ice cream revenues are also growing at 15% CAGR. This is also reflecting in product mix with ecommerce contributing ~5% of topline from near 0% YoY. Pharma share in the topline has also also continues to increase. Greenfield 8,000 pallets capacity addition and brownfield 26,000 pallets capacity addition is ongoing. Base capacity is 107,450 pallets across 35 locations.

* Maintain BUY. GDL remains a direct play on: i) Theme of rail freight progressively gaining share over road, accentuated by DFC, ii) cold chain logistics opportunity in India augmented by increased focus on pharma vertical, given its 40% controlling stake in Snowman Logistics; and iii) meaningful deleveraging ‘net debt to market cap’ at ~33%. Meaningful value unlocking cannot be ruled out.

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