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Weak volumes but market position sustained

Gateway Distriparks’ (GDL) Q3FY23 PAT at Rs548m missed estimate of Rs606m (consensus: Rs544m) due to lower EXIM volumes. Total volumes declined 12.5% YoY to 168k TEUs (EXIM/CFS down 8%/16% YoY to 79k/90k TEUs). EXIM volumes were impacted due to 15%+ decline in exports and operational constraints due to fog and ongoing track-works (completed now). GDL has added ICDs in Jaipur (greenfield) and Kashipur to its portfolio and targets to add 2 more ICDs by FY25E. EXIM growth guidance has been lowered from 10%+ growth to YoY flat volumes in FY23E with slight moderation in outlook for FY24 as well. Margins are likely to remain steady and support 11.3% pre-tax earnings CAGR over FY22-25E. Maintain BUY with PT of Rs97. Earnings below expectations led by lower EXIM volumes

Revenue/EBITDA declined by 2.3%/2.7% YoY to Rs3.4bn/Rs909m (estimate:

Rs3.7bn/ Rs1bn) due to lower volumes. Total volumes declined by 12.5% YoY to 168k TEUs (EXIM down 8% YoY to 79k TEUs while CFS down 16% YoY to 90k TEUs due to discontinuation of Punjab Conware CFS concession). EXIM volumes were weak due to 15%+ decline in exports and operational constraints (resolved now). Imports grew moderately in Q3FY23. EXIM realizations grew by 12% YoY to Rs34,280/TEU due to higher imports (60%) vs. exports (40%). However, EBITDA was flat YoY at Rs9,000/TEU as trade imbalance also led to higher empty running. CFS realizations grew by 1% YoY to Rs8290/TEU while EBITDA grew by 7% YoY to Rs2200/TEU.

Lowers EXIM volume guidance for FY23/24E; CFS volumes to remain at current levels

GDL has lowered EXIM volume guidance to flat YoY in FY23 (earlier guidance of 10%+ growth) due to weakness in global trade which implies 13% YoY decline (flat QoQ) in Q4FY23 EXIM volumes. Outlook for FY24 has also been moderated. CFS volumes are likely to remain sluggish in any case

Showed renewed urgency for expansion; to acquire two more ICDs by FY25E

GDL has acquired two ICDs in Jaipur (greenfield) and Kashipur in FY23. It acquired 30 acre land parcel in Jaipur for Rs270m to set-up new ICD with initial capacity of 1.25lakh TEUs p.a (Capex: Rs600m). GDL expects to commence operations in Q3FY24 but meaningful volume contribution would come in FY25E. GDL also acquired Kashipur Infra freight terminal at an EV of Rs1.56bn. Currently, the ICD handles volume of 3k TEUs/month and GDL has guided for volume of 36,000 TEUs in FY24E. GDL will be consolidating Kashipur volumes in Q4. GDL targets to add 2 more ICDs by FY25E to expand its terminal network.

Near term growth weakness but assets retain strength; Maintain BUY

Given the weak EXIM volumes in Q3FY23 and guidance cut, we have cut volume estimates by 11%/12% leading to EPS cut of 16%/13% in FY24/25E. However, GDL enjoys a strong early mover advantage in its EXIM business catering to northern markets and retains its market share in both NCR and Ludhiana markets. New terminal additions further strengthen in competitive position. Balance sheet has strengthened with Net Debt/Equity of 0.22x and Net Debt/EBITDA of 1x as on Sept-22. We maintain our Buy recommendation with a revised PT of Rs97 (11x average FY24-25E EBITDA).

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