Gateway Distriparks Ltd.

Transcription

1 October 7, 211 Gateway Distriparks Ltd. CMP Rs. 138 Target Rs. 192 Initiating Coverage- Buy Key Share Data Face Value (Rs.) 1. Equity Capital (Rs. crs) Market. Capitalization (Rs. crs) wk High / Low (Rs. ) / 97 Average Yearly Volume 6589 BSE code NSE code Reuters code Bloomberg code GDL GATE.BO GDPL IN Company Profile Gateway Distriparks Ltd (GDL), a leading provider of port related logistics support services in India. GDL operates container freight station on a pan India basis with strategic locations at JNPT, Chennai, Vizag and Kochi and ICDs located at Garhi Harsaru and Ludhiana, Kalamboli and Asoti, Faridabad. This presence enables it to cater to the West coast traffic, demand from the Northern hinterlands as well as the east coast traffic. Shareholding Pattern 3th June 211 Source: Capitaline Financials (Consolidated) (Rs. Crore) Net Sales Sales Gr 14% 16% 19% EBIDTA PAT PAT Gr 4% 24% 24% 25% EPS (Rs.) CEPS (Rs) Key Financial Ratios Div. yield 2.5% 4.3% 2.9% 2.9% P/E P/BV P/Cash EPS MCap/Sales EV/EBIDTA ROCE 8% 9% 13% 15% ROE 12% 1 11% 13% EBITDM(%) 24% 27% 3 3 NPM (%) 15% 16% 17% 17% Debt-Equity I year Performance comparison GDL v/s BSE Midcap.3.2 Pu b lic 1 % Pr o m o te r 4 % N o n Pr o m o te r 9 % F o r e ig n 2 8 % In s titu io n s 1 3 % Investment Rationale Expansion of CFS facilities to capture burgeoning container traffic GDL is one of the key player in CFS business with a total capacity of.44 mn TEUs. GDL is focusing to enhance CFS business, given that CFS division attracts higher margin. It has expanded its capacity at Chennai and Vizag port to 9 and 48 TEU respectively. Kochi port facility is expected to start its operation by Q4FY12, with this total CFS capacity would increase to.54 mn TEU by FY13E from.44 mn TEUs in FY11. We expect CFS volume to register 12.2% CAGR from 3,33,422 TEUs in FY11 to 4,2, TEUs in FY13E with the new capacity starting at Kochi. We expect CFS division to register a top line of Rs crore and Rs crore in FY12E and FY13E respectively. Rail Business a key growth driver GDL Ltd is now the largest private railway haulage operator in India and operating 21 rakes and 3 ICDs at strategic locations. ICD at Faridabad is expected to be operational from Q3FY12E. On the rail business, volume is expected to grow at a CAGR of 16.5% over FY11-FY13E.We estimate GDL s Railway business s sales to grow at a 16% CAGR in FY11-FY13E. Cold chain logistics business adjoining growth Snowman Logistics Ltd (SLL) is the only organized pan India cold chain logistics player in this growing business, with a nationwide network connecting more than 1 cities and more than 44 outlets. Company has a capacity of over 16 pallets for frozen and chilled products and fleet of over 1 refrigerated trucks. We expect pallet capacity to increase to 31 in FY12E and 41 by FY13E GDL Analyst: Kamna Jain Tel No.: kamna.jain@skpmoneywise.com BSEMIDCAP Valuation At current market price of Rs. 138-, GDL is trading at P/E of 12.4x and 1.x of FY12E and FY13E earnings of Rs and 13.8 respectively. We recommend BUY rating on the stock with a target price of Rs. 192/- ( upside) in 15 months at the P/E of 14x on FY13E earnings. SKP Securities Ltd Page 1 of 11

2 Industry Overview Logistics Industry The Indian logistics industry accounts for a mere 2% ($1 billion) of the $5 billion global logistics industry despite having the second largest network of roads at 3.83 million km, the fourth largest rail network of 63 km, 128 airports, 12 major ports, 1 trans-shipment port and 187 non major ports. Indian Logistics sector grew by 8 to 1 percent annually over the last decade. Several factors have favorably impacted the growth of the logistics industry, like the country s tax regime, growth across major industry segments such as automobile, pharmaceutical, fast moving consumer goods (FMCG) and the emergence of organized retail. Economic survey for reflects that economy is an upswing mode, with a growth of 8.6% in FY1 and FY11 and is projected to grow at 8.75% % in FY12. Strong economic growth and liberalization have led to considerable increase in domestic and international trade volumes over the past few years. Consequently, the requirement for transportation, handling and warehousing is growing at a robust pace and is driving the demand for integrated logistics solutions. Exim trade volume of India is growing consistently from last decade hence India is set to increase its share in global trade from less than 1% now to about 1.6% in India's Exim Trade 12 1 Rs. crores FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY1 Apr- Dec 11 Source: Economic survey Export to GDP ratio Thailand China South Africa Maxico India Source: SKP research SKP Securities Ltd Page 2 of 11

3 India s level of containerization is less than 25% as against global average of 6-7. Average time taken to clear import and export cargo at ports is about 19 days in India, against 3-4 days in Singapore. The trend towards containerization picked up in India in the last decade. Container traffic has seen a 12% CAGR in India from 2.5 million TEU in 2-1 to 7.5 million TEU in The incessant growth in containerized traffic provides significant indication of increase in multimodal transport as containers are designed for door to door transportation by different modes. 8 Container traf f ic (TEU') FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY1 FY11 Source: IPA & SKP Research CFS/ICDs CFSs and ICDs are facilities set-up for the purpose of in-transit container handling, examination assessment of cargo with respect to regulatory clearances, both import and export. The CFSs / ICDs are an integral part of the logistics chain in relation to the movement of containerized cargo. Functionally, there is no distinction between an ICD/CFS as both are transit facilities which offer services for containerization of break-bulk cargo and vice-versa. An ICD is located in the interiors (outside the towns) of the country away from the gateway ports. A CFS, on the other hand, is an off dock facility located near gateway ports which helps in decongesting the port by shifting cargo and customs related activities outside the port area. Primary Functions of ICDs / CFSs o Receipt and dispatch/delivery of cargo. o Stuffing and stripping of containers. o Transit operations by rail/road to and from gateway ports. o Customs clearance. o Consolidation and desegregation of cargo. o Temporary storage of cargo and containers. o Maintenance and repair of container units. India s freight transport system currently carries approx. 2.8 billion metric tones of cargo, which is expected to grow to approx 5.2 billion MT by 22 at a CAGR of 6 percent. Logistics cost in India is fairly high at around 14% of GDP, as against 8-9% in most developed nation. This inefficiency is reflected on all products being manufactured, consumed, warehoused and traded in India, contributing significantly to the biggest challenge faced by India s growing economy Inflation. Measurable improvements have been made over the last few years in building hard infrastructure, but still at the fundamental level, road has the largest share of transport at about with rail having only about 35% market share. Thus dependency on road makes hinterland cargo movement more expensive and inefficient. SKP Securities Ltd Page 3 of 11

4 Company Overview Gateway Distriparks Ltd (GDL), Gateway Distriparks Ltd, a leading provider of port related logistics support services in India, promoted by the Windmill group, the Thakral group and Paramesware Holdings Ltd based in Singapore and Mr. Prem Kishan Gupta and Prism International Pvt Ltd, based in India. GDL operates container freight station on a pan India basis with strategic locations at JNPT, Chennai, Vizag and Kochi. GDL s subsidiary, Gateway Rail operates the Rail-linked facilities at Garhi-Harsaru (Gurgaon, Haryana), Ludhiana (Punjab) and Kalamboli (Navi Mumbai). Its upcoming terminal at Asaoti (Faridabad, Haryana) will be operational by Q4FY Gateway rail operates 21 trains and 235+ road trailors at its rail linked terminals. The service offering of the company includes transportation of containers to and from the port, stuffing and destuffing of cargo, custom clearance, storage in warehouse and other value added services such as general and bonded warehousing services, palletizing, shrink wrapping and other administrative services. GDL also provides Cold Chain Logistics Solutions via a pan-india network through its JV with Mitsubishi and IFC (World Bank) Snowman Logistics Ltd. In March 21, International Finance Corporation has invested Rs million in the equity capital of the company. Mitsubishi Corporation, Mitsubishi Logistics Corporation and Nichirei Logistics Group Inc. are other shareholders in SLL. The company is in the process of expanding its cold store capacities and refrigerated transport network.. Location and facilities Location CFS/ICDs Area(Acres) Title Navi Mumbai - JNPT CFS 35 Leasehold Punjab Conware - JNPT CFS years O&M Chennai CFS 2 Freehold Vizag CFS 2 Leasehold Kochi CFS 2 Freehold Garhi Harsaru Rail ICD 9 Freehold Ludhiana Rail ICD 5 Freehold Kalamboli, Navi Mumbai Rail ICD 17 Alliance Faridabad Rail ICD 66 Freehold Source: Company & SKP Research SKP Securities Ltd Page 4 of 11

5 Investment Arguments Strategic location and enjoying fair market share Gateway Distriparks Ltd has its presence in key ports of India like JNPT Mumbai, Chennai, Vizag, Kochi where its CFS are enjoying fair market share. The CFS at Navi Mumbai is located at a distance of 9 kms from JNPT. JNPT has recorded a CAGR of 14% from 1.19 million TEUs in 2-1 to 4.27 million TEUs in in the volume of container throughput handled over the past ten years. GDL is very well positioned to take advantage of this growth potential at JNPT. The CFS at Chennai is situated at a distance of 16 kms from Chennai port, India s second largest container terminal port. GDL is enjoying 8% market share at this port. The ICD at Garhi is located at a distance of 4 kms west of Delhi and can also cater to the markets in Punjab, Rajasthan, Uttar Pradesh, Haryana and Delhi. Thus, GDL with its pan India presence at Navi Mumbai, Chennai, Vizag, Kochi and Delhi and enroute access to western gateway ports of Kandla, Pipavav and Mundra can effectively address the requirements of Import/ export container cargo from various strategic locations. Expansion of CFS facilities to capture burgeoning container traffic GDL is one of the key player in CFS business with a total capacity of.44 mn TEUs. Gateway Distriparks enjoys 13% market share at JNPT Mumbai, 8% market share at Chennai and approx market share at Vizag port. GDL is focusing to enhance CFS business, given that CFS division attracts higher margin. It has expanded its capacity at Chennai and Vizag port to 9 and 48 TEU respectively. Kochi port facility is expected to start its operation by Q4FY12, with this total CFS capacity would increase to.54 mn TEU by FY13E from.44 mn TEUs in FY11. JNPT contributes approx 7 of total GDL s CFS volume and it attracts higer realization as 85% of the total JNPT volume is cotributed by imports. JNPT is India s largest container port accounting for of the total Indian container traffic movement. We expect CFS volume to register 12.2% CAGR from 3,33,422 TEUs in FY11 to 4,2, TEUs in FY13E with the new capacity starting at Kochi. We expect CFS division to register a top line of Rs crore and Rs crore in FY12E and FY13E respectively. TEU % % % % (Rs. in crore) % % % % CFS volume Growth(%) CFS Revenue Growth(%) Source: Company and SKP Research SKP Securities Ltd Page 5 of 11

6 Rail Business a key growth driver `` GDL Ltd entered the container rail haulage sector in 27, after the space was thrown open to the private participation. GDL Ltd is now the largest private railway haulage operator in India and operating 21 rakes and three ICDs at strategic locations. ICD at Faridabad is expected to be operational from Q3FY12E. Strong growth potential -In FY8 total Indian freight transport system carried approx. 2.8 billion MT of cargo, of which road transport has and Rail has just 35% market share. High dependence on road transport causes inefficiencies and higher cost, to curve this there is a huge need of improving Rail s share in the Indian freight transport system. We believe, railways will maintain their relative advantage over truckers given the price benefits. Further the construction of dedicated freight corridor (DFC) would provide boost to the players operating in the railway haulage business by adding additional capacity that they can utilize. Strong future of rail logistics, reduction in additional fixed cost, better utilization of rakes, lower operating expenses and new ICDs at Faridabad are likely to improve the topline and profitability of Rail business. On the rail business, volume is expected to grow at a CAGR of 16.5% over FY11-FY13E.We estimate GDL s Railway business s sales to grow at a 16% CAGR in FY11-FY13E. TEU % % (Rs. in crore) % % % 16.2% 1. Rail Volume Growth(%) Rail Revenue Growth(%) Source: Company and SKP Research Cold chain logistics business adjoining growth Cold Chain Logistics business offers a Rs. 1 crore market opportunity in India, out of which 15% comes through organized players. Snowman Logistics Ltd (SLL) is the only organized pan India cold chain logistics player in this growing business, with a nationwide network connecting more than 1 cities and more than 44 outlets. GDL has already accounted 2-25% of the organized market. There is increasing demand for cold chain facilities due to increase in consumption of perishable products and entry of large retail chains, which require extensive network of cold chain stores and refrigerated transport to manage their supply chain. SKP Securities Ltd Page 6 of 11

7 SLL is expanding its cold storage network at key locations and the refrigerated transport fleet across the country. SLL serves large FMCG companies and organized retail chains like Amul, Mother Dairy, Baskin Robbins, KFC, HUL, ITC, Parle Agro etc. Company has a capacity of over 16 pallets for frozen and chilled products and fleet of over 1 refrigerated trucks. We expect pallet capacity to increase to 31 in FY12E and 41 by FY13E. GDL s cold chain logistics segment is looking fairly optimistic on the back of elevated demand. This segment has reported Revenue of Rs. 45 crore in FY11 and we expect it to grow at a CAGR of 46% from FY11 to FY13E. We believe, this segment will contribute around 9% and 11.3% to company s total revenue in FY12E and FY13E respectively. 12 Revenue (Rs. crore) % 67 48% 96 44% Growth (%) 2 2% Source: SKP Research Key Concerns Increased competition: Logistic industry in India is quite fragmented. There are many small and large players providing end to end logistics solution, making this market highly competitive. Significantly, large numbers of CFSs are coming up at Mumbai, Chennai and Kolkata coupled with shipping lines setting up their own CFSs is a major threat. However, with the anticipated increase in volumes, growth momentum is expected to be sustained in the short to medium term. Economic downturn: Container growth depends on the EXIM volume in a country. In 28-9 companies have already seen a global turmoil. Any further slowdown can affect GDL s utilization and rates for its service offering. Regulatory changes: GDL s major revenue comes from its CFSs facility at JNPT. The business potential of GDL s Navi Mumbai operations is directly related to the operations of JNPT. Thus any downturn or regulatory changes at JNPT could affect the company s performance in future. SKP Securities Ltd Page 7 of 11

8 Peer Valuation We believe that GDL Ltd is the best positioned company in the logistics sector with its pan India presence of CFSs and ICDs and early entry in Rail haulage business. Revenue P/E (x) EV/EBITDA (x) P/BV (x) EBITDA Margin (%) FY12E FY13E FY12E FY13E FY12E FY13E GDL % Concor % Allcargo Valuations & Outlook GDL Ltd is a strong player in logistics sector led by its continuing growth momentum of its CFS business with presence at strategic locations and aggressive entry into Rail Haulage and Cold chain logistics business. At current market price of Rs. 138-, GDL is trading at P/E of 12.4x and 1.x of FY12E and FY13E earnings of Rs and 13.8 respectively. We recommend BUY rating on the stock with a target price of Rs. 192/- ( upside) in 15 months at the P/E of 14x on FY13 earnings. 1 year forward P/E Band 1 year forward P/BV Band Apr- 6 Sep- Feb- Jul Dec- May- 7 8 Oct- 8 Mar- Aug- Jan- Jun Nov- Apr- Sep Apr-6 Aug-6 Dec-6 Apr-7 Aug-7 Dec-7 Apr-8 Aug-8 Dec-8 Apr-9 Aug-9 Dec-9 Apr-1 Aug-1 Dec-1 Apr-11 Aug X 15. X 2. X 25. X 1. X 1.5 X 2. X 2.5 X 3. X Source: SKP Research Financial Outlook Topline to grow at a CAGR of 19.4% over FY11-13E Rs. in Crs % % % We expect consolidated revenue to grow at a CAGR of 19.4% over FY11-FY13E on back of growth in cold chain logistics business, capacity addition at existing CFS and commencement of new CFS and ICD.. SKP Securities Ltd Page 8 of 11

9 CFS business is expected to grow at a CAGR of 18.4% over FY11-FY13E led by operational of new CFS at Kochi and better utilization of CFS at JNPT. Rail business is expected to register a topline of Rs crore in FY13E with addition of new ICD at Faridabad and better volume. Cold chain logistics division is expected to grow at a CAGR of 46% over FY11-FY13E led by increase in pallets capacity. Revenue Mix: 1 8 FY1 FY11 FY 12E FY13E CFS Rail Logistics Cold Chain Logistics Rs. in crore EBITDA margin (%) EBITDA to grow at a CAGR of 27% over FY11- FY13E We expect EBITDA margin to improve by approx 35 bps from 24.2% to 3.2% over FY11-FY13E, mainly due to combined growing contribution of CFS and Cold chain logistics business.. 2. EBITDA EBITDA Margin(%) Rs. in crore PAT margin(%) Net profit margin is expected to improve by 13 bps from 16.2% to 17.4% over FY11- FY13E.. Net Profit PAT Margin (%) 5. Source: SKP Research SKP Securities Ltd Page 9 of 11

10 Consolidated Financials for FY March (Rs. in Crore) Income Statement Balance Sheet Gateway Distriparks Ltd. Financial Year Net Sales Growth (%) 14.3% % 2.1% EBIDTA Growth (%) -15.1% 27.8% % Depreciation EBIT Interest Other Income PBT Tax PAT Growth (%) 3.7% 24.2% 23.8% 25.5% Minority Interest Profit after minority interest O/S shares EPS (Rs.) Year End March Equity capital CCPS Reserves & Surplus Shareholder's Fund Minority interest Secured Loan Deferred tax liability Sources of funds Net Block Intangible Assets Investments Total Current Assets Current Liabilities & Provisions Net Current Assets Misc. Expenses Uses of funds Ratios Year End March Valuation Ratios (X) Price Earning (P/E) Price / Book Value Price / Cash EPS EV / EBIDTA Market Cap / Sales Earning Ratios OPM 24.2% 26.7% 3.1% 3.2% NPM 15.3% 16.2% 16.9% 17.4% RoNW 11.9% 9.8% 11.4% 12.9% RoCE 8.3% 9.3% 12.9% 14.9% DPR Balance Sheet Ratios Debt-Equity Current Ratio Debtors Days Creditors Days Interest Coverage Ratio Cash Flow statement Year End March Profit before tax Add: Depreciation, Int. & other expenses Net changes in working capital Direct taxes paid Cash Flow from Operating activities Capital expenditure Investment,Dividend, Interest & others Change in minority interest Cash flow from investing activities Cash Flow from Financing activities Cash Flow during the year Opening Cash Cash & cash equivalent SKP Securities Ltd Page 1 of 11

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