Buy Gateway Distriparks Ltd For Target Rs.100 - JM Financial Institutional Securities Ltd
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Gateway Distriparks’ (GDL) 2QFY24 revenue grew 11% YoY, led by 5% rise in blended realisation and volume each. Rail revenue grew 15% YoY led by robust volume growth of 12% YoY on account of spillover from 1Q (impacted by cyclone Biparjoy and certain double stack restrictions). Exports volume saw an uptick in 2Q, mainly at the Gurgaon terminal on account of improved exports of automobiles and reefer. Volume at Kashipur was maintained at the monthly run rate of 3-3.5k TEU/month during the quarter and the management expressed confidence of scaling up volume to 6k TEU/ month in the next 2-3 years. The company guided for a) 12% growth in rail volume in 2HFY24 (implying 11-12% volume growth in FY24), b) INR 3bn capex plan over the next 2 years towards new terminals in northern and central India, and c) achieving INR10,000/TEU margin over the medium term. We have revised our FY24-26 EPS estimates by 1-5% to reflect 2Q performance and outlook. We arrive at a Dec’24TP of INR 100, basis 9x Dec’25 EV/EBITDA. We maintain BUY. Key risks: a) lower-than-expected cargo growth and b) adverse outcome in pending litigations.
2QFY24 summary: Consolidated revenue grew 11% YoY/+8% QoQ (+5% 4-year CAGR) to INR 3.9bn (4% below JMFe) with 5% rise in volume (+3% 4-year CAGR; +7% QoQ and in line with JMFe) and 5% increase in blended realisation (+2% 4-year CAGR; flat QoQ and 5% below JMFe). EBITDA grew 8% YoY (+10% 4-year CAGR; 8% QoQ) to INR 1.03bn (7% below JMFe) and margin contracted by 80bps YoY (+10bps QoQ) to 25.9%. PBT grew 18% YoY (+45% 4-year CAGR; +11% QoQ) and was 10% below JMFe. Adj. PAT grew 24% YoY (+54% 4-year CAGR; +16% QoQ) to INR 730mn. -
A) Rail: Revenue grew 15% YoY to INR 3.2bn (+9% 4-year CAGR; +7% QoQ) with volume rising 12% YoY to 101k TEU (3% below JMFe) while realisation rose by 3% YoY to INR 31,777/TEU (4% below JMFe). EBITDA (excluding other income) is estimated to have risen 12% YoY/+11% QoQ to INR 891mn (6% below JMFe). EBITDA/TEU is estimated to have risen 1% YoY (-1% QoQ) to INR 8,850/TEU (4% below JMFe). -
B) CFS: Revenue fell by 2% YoY (+7%QoQ) to INR 816mn (-5% 4-year CAGR; 4% below JMFe) as realisation fell by 2% YoY to INR 8,838/ TEU. Volume was flat YoY (+3% QoQ) at 92k TEU and 4% above JMFe. EBITDA (excluding other income) declined 14% YoY/8% QoQ. EBITDA margin per TEU (including other income) fell 14% YoY/10% QoQ to INR 1,534/TEU.
* Export volume picking up: In 2QFY24, rail volume grew by 12% YoY. Volume picked up on account of spillover from 1Q. As per the management, GDL is able to maintain its market share in NCR (Faridabad & Gurgaon) at c.17%, though it has lost slightly in Ludhiana. GDL has till now invested INR 40cr in Jaipur ICD and will invest another INR 50cr this fiscal. The company is expecting double-digit volume in the rail segment and targets to achieve INR10,000/TEU margin in the medium term.
* Kashipur on track: Kashipur has contributed around 9,000-10,000 TEU in 2QFY24 and has 35-40% market share in that area. The terminal has touched 3,500 TEU/month mark and will soon be touching 4,000 TEU mark, as per the management. This will be gradually scaled up to 6,000 TEU/ month over the next 3 years. The demand is on account of regular service and volume emanating from nearby catchment areas such as Rudrapur, Sitarganj and Moradabad. Unlike before, ICD is now operating its own trains and all services are being provided, including first mile and last mile connectivity.
* Other highlights from conference call:
- GDL will invest INR 3bn over the next 24 months; INR 1bn per terminal will be invested for two terminals.
- The management expects a gradual shift of 1-2ppt per annum from road to rail due to the dedicated freight corridor.
- Jaipur ICD is expected to be commissioned by 1QFY25; ramp-up will take 6 months.
- GDL will add three high speed rakes (81tn each in FY25 and FY26 through lease model).
- The management highlighted that there have been no price hikes and prices are expected to be stable.
- Net debt stood at INR 3.14bn vs. INR 3.03bn in Jun’23.
* Revise estimates and TP; maintain BUY: We cut our FY24 EPS estimates by 5% and keep FY25-26 unchanged to reflect the lower depreciation in FY25-FY26 and arrive at a Dec’24TP of INR 100 (9x Dec’25 EV/EBITDA). We maintain BUY. Key risks: a) lower-thanexpected cargo growth and b) adverse outcome in pending litigations
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