Gateway Distriparks Ltd Logistics STOCK IDEA Rating: BUY Date July 24, 215 CMP (Rs.) 337 Target (Rs.) 45 Potential Upside 2% BSE Sensex 28371 NSE Nifty 859 Scrip Code Bloomberg GDPL IN Reuters GATE.BO BSE Group A BSE Code 532622 NSE Symbol GDL Market Data Market Cap.(Rs. Cr) 3668 Equity Sh. Cap. (Rs Cr) 18.7 52 Wk High/Low 459.4/224.6 Avg. Quarterly Volume 3 Face Value (Rs.) 1 Shareholding Pattern (As on 3 th Jun 215) FII 29.8 DII 25.6 Promoters 32.9 Public & Others 11.7 Total. Comparative Price Chart 15 5 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 GDPL Sensex Atul Karwa Research Analyst atulkarwa@systematixshares.com Arun Gopalan VP Research & Investments arungopalan@systematixshares.com Gateway Distriparks Ltd (GDL) is one of the largest integrated logistics players in India. It operates through three verticals which are synergetic and capable of being interlinked Container Freight Stations (CFS), Inland Container Depots (ICD) with rail movement of containers to major maritime ports, and Cold Chain Storage and Logistics. It operates 4 Container Freight Stations (CFS) and 4 Inland Container Depots (ICD) with a handling capacity of 6, and 8, TEUs respectively and 85,5 pallets in cold storage business. The Rail Freight segment shows strong growth visibility and robust margins, driven by increasing proportion of double stacking, while the Dedicated Freight Corridor (DFC) initiatives would further strengthen. PE investor Blackstone, who owns 49% of Gateway Rail Freight Ltd. (GRFL) could push for a listing resulting in huge value unlocking. We therefore assign a BUY rating to GDL. Strong growth with margin improvement in rail logistics: The rail logistics business of the company has witnessed strong growth of 22% in FY15 with margins improving by over 6 bps on back of tariff hikes in Dec-14 and Mar-15. It has also resorted to double stacking of containers to reduce haulage charges. Though volume growth is likely to remain muted in H1FY16 due to increase in tariffs, it is expected to pick up H2FY16. However, with double stacking and higher proportion of imports handle margins are likely to be sustained. Further, government initiatives to set up Dedicated Freight Corridors (DFC) will aid to meet the growing demand for rail traffic. Rail logistics accounted for over 6% of the consolidated revenues in FY15. Slowdown in Mumbai CFS offset by pick up in Vizag and Kochi CFS utilization: GDL has been continuously increasing its throughput at its four CFS at Mumbai, Chennai, Vizag and Kochi. Utilization levels at its Kochi and Vizag CFS have been steadily increasing. Overall CFS volumes have increased at CAGR of 3.8% from 333,422 TEUs in FY11 to 387,138 TEUs in FY15. Realizations which declined in H1FY15 have picked up in H2FY15. CFS, which is the cash cow for the company accounts for 31% of revenues and 45% of the EBIT. Management has guided for 5-1% increase in volumes and plans to set up another CFS at a capex of Rs 5-6 cr. Expanding capacity to meet the increasing needs: GDL is expanding capacity in all its three verticals. It is looking to set up another CFS at a capex of Rs 5-6 cr. In rail logistics it is putting a new transhipment terminal in Viramgaon requiring a capex of ~Rs 5 cr. This terminal is likely to be operational by Q1FY17. Besides GDL is also looking to acquire land for a new terminal in Ahmedabad in the next 12-18 months. Management also expects to increase capacity at Snowman Logistics to 115, pallets by end of FY16 with a capex of Rs 125 cr. These new capacities would drive the revenue growth of the company alongwith the pick up in economy. Listing of Rail Logistic company to result in value unlocking: Blackstone had invested Rs 3 cr in GDL s rail logistics unit Gateway Rail Freight in v-9 for 37.5% stake valuing the company at Rs 8 cr then. Gateway Rail handles all the rail operations of the parent group. It provides inter-modal logistics and operates its own rail-linked inland container depots at Garhi-Harsaru (Haryana), Ludhiana (Punjab) and Kalamboli (Navi Mumbai). Gateway Rail owns and runs a fleet of 21 trains and 26+ road trailers at its rail-linked terminals. GDL had earlier listed its cold chain arm Snowman Logistics. The book value of investments in GRFL stood at Rs 197 cr at the end of FY14 and listing of the Rail logistics unit would result in value unlocking for the company. Valuation & Outlook: While CFS unit is likely to grow at mid single digit rate, growth will be driven mainly by rail logistics. Although volume growth is likely to remain muted in H1FY16 due to tariff hikes, we believe it will pick up in H2FY16 alongwith economic recovery. We expect GDL to outperform the industry with higher realizations and improving utilization. At CMP of Rs 337 the stock is trading at PE of 14.1x of its FY17E earnings and we recommend BUY with a target of Rs 45. Particulars Sales EBITDA EBITDAM PAT FY14 112.8 257.2 25.4 135.8 13.4 12.5 14.3 26.9 3.2 12. FY15 1111.3 326.7 29.4 187.8 16.9 17.3 112.1 19.5 3. 15.4 FY16E 127.9 368.9 3.5 24.3 16.9 18.8 119.9 17.9 2.8 15.7 FY17E 1413.9 448.8 31.7 259.6 18.4 23.9 129.8 14.1 2.6 18.4 PATM EPS (`) BVPS (`) P/E (x) P/BV (x) RoNW
Sales & Growth Sales breakup 16 36.4% 14 1 8 16.2% 17.% CFS 33% 6 4 6.1% 9.6% 8.8% 817 95 8 115 122 147 ICD Rail 67% Net Sales (Rs Cr) Growth EBITDA & Margin TEUs handled 5 4 3.3% 25.6% 25.4% 29.4% 3.5% 31.7% 3 249 244 257 327 369 449 333422 131337 33488 18473 342661 233566 344 212317 387138 248367 434 278171 465 319897 FY11 EBITDA (Rs Cr) EBITDA Margin CFS ICD Rail PAT & Margin RoNW & RoCE 3 25 15 16.1% 13.3% 13.4% 16.9% 16.9% 18.4% 25. 2. 15. 1. 16.2 12.7 13. 12.2 11.7 12. 17.1 18.7 15.4 15.7 22. 18.4 5 132 127 136 188 24 26 5.. PAT (Rs Cr) PAT Margin RoCE RoNW Source: Company, Systematix Research
COMPANY BACKGROUND Gateway Distriparks Limited is the only logistics facilitator in the whole of India with three verticals which are synergetic and capable of being interlinked Container Freight Stations (CFS), Inland Container Depots (ICD) with rail movement of containers to major maritime ports, and Cold Chain Storage and Logistics. GDL operates two Container Freight Stations at Navi Mumbai and Chennai, and one at at Visakhapatanam and Kochi, with a total capacity of over 6, TEUs. These CFSs offer transportation & storage, general and bonded warehousing, empty handling and several value added services. GDL's rail operations are handled by a subsidiary, Gateway Rail Freight Limited (Gateway Rail) in which The Blackstone Group of USA has made a private equity investment through Blackstone GPV Capital Partners (Mauritius) V-H Ltd. Gateway Rail provides inter-modal logistics and operates its own Inland Container Depots/Dry Ports. Gateway Rail operates rail linked facilities at Garhi- Harsaru (Gurgaon, Haryana), Ludhiana (Punjab) and Kalamboli (Navi Mumbai) and Faridabad. Gateway Rail owns and operates a fleet of 21 trains and 26+ roadtrailers at its rail linked terminals. Gateway Rail operates regular container train service from these ICDs/Dry Ports to the maritime ports at NhavaSheva, Mundra and Pipavav, transporting import and export as well as domestic containers. All major shipping lines operate from these Gateway Rail terminals for both export and import. The third vertical consists of cold chain logistics solutions out of 19 locations in India through the subsidiary, Snowman Logistics Limited in which Mitsubishi, Nicherei and IFC (World Bank) are investors. Snowman is a leading Logistics Services Provider and India's first cold supply chain company with a nationwide network connecting more than cities and more than 4,4 outlets. Snowman has a pan-india presence that offers comprehensive warehousing, transportation and distribution services. Its extensive infrastructure includes 19 ISO-2 certified warehouses and more than owned and leased reefer vehicles and transport assets. It recently got Snowman listed on the bourses through an IPO (GDL now owns 4% in Snowman) Key Management Personnel : Name & Designation Prem Kishan Gupta Chairman & Managing Director R. Kumar CFO Brief profile Mr Gupta has been serving as the MD of GDL since Jun-9. Prior to joining GDL Mr Gupta has been in the family business of trading in newsprint since 1978. He represents newsprint manufacturers in the USA, Canada and Europe with strong tie-ups in South East Asia. Mr Kumar is a qualified CA, CWA and CS and has over 23 years of experience in the industry. He has a wide range of experience in finance, accounts, taxation, business planning, financial structuring, dealing with banks & financial institutions and managing capital issues across industries. He has been the CFO and CS of the company since Dec-.
FINANCIAL PERFORMANCE PROFIT & LOSS (Rs Cr) CASH FLOW (Rs Cr) Particulars FY13 FY14 FY15 FY16E FY17E Particulars FY13 FY14 FY15 FY16E FY17E Operating Income 954.1 112.8 1111.3 127.9 1413.9 Profit Before Tax 173.3 166.2 226.6 272.4 346.2 Operating Exps 574.5 62.9 641. 685.1 787.8 Depreciation 69.9 8.1 88.9 93.5 12.5 Employee cost 46.4 48.4 42.1 45.7 53.5 Others 4.9 17.2 13.8 16.9 16.5 Other operating expenses 89. 14.4 11.5 18.2 123.8 Change in working capital (26.4) (13.2) (3.4) 2.6 (.3) EBITDA 244.1 257.2 326.7 368.9 448.8 Tax expenses (28.5) (4.5) (61.5) (68.1) (86.5) Depreciation 69.9 8.1 88.9 93.5 12.5 Cash flow from Ops 193.3 29.8 237.5 317.3 378.3 EBIT 174.2 177. 237.8 275.5 346.4 Net Capex (24.4) (19.2) (155.9) (15.) (15.) Interest 16.4 27.9 24. 16.9 16.5 Other investing activities 67.9 (44.6) (38.5) (4.1) (24.) Other Income 15.5 17.1 12.8 13.9 16.3 Cash flow from Invest (193.2) (.5) (182.2) (154.1) (174.) Profit Before Tax 173.3 166.2 226.6 272.4 346.2 Proceeds from Eq Cap 2.2 1. 1.2.. Tax 37.3 19. 44.1 68.1 86.5 Borrowings / (Repayments) 124. 67.5 42.8 (6.2) (2.3) PAT 136. 147.3 182.5 24.3 259.6 Dividends paid (126.) (5.8) (9.2) (119.5) (151.9) PAT after Min Int 126.7 135.8 187.8 24.3 259.6 Interest paid (14.8) (26.8) (23.7) (16.9) (16.5) Cash flow from finance (14.5).2 (14.7) 2.5 33.6 Net Cash Flow (14.5).2 (14.7) 2.5 33.6 BALANCE SHEET (Rs Cr) RATIO ANALYSIS Particulars FY13 FY14 FY15 FY16E FY17E Particulars FY13 FY14 FY15 FY16E FY17E Share Capital 18.5 18.6 18.7 18.7 18.7 EPS 11.7 12.5 17.3 18.8 23.9 Reserves & Surplus 68.2 728. 814.6 899.4 7.1 BVPS 99.9 14.3 112.1 119.9 129.8 Total Shareholder funds 184.5 1132.4 1219.1 133.9 1411.6 P/E 28.3 26.4 19.1 17.6 13.8 Minority Interest 8.6 125.7 25.9 25.9 25.9 P/BV 3.3 3.2 2.9 2.8 2.5 n Current Liabilities RoE 11.7% 12.% 15.4% 15.7% 18.4% Total borrowings 252. 314.8 172.5 166.4 164.1 RoCE 13.% 12.2% 17.1% 18.7% 22.% Deferred tax liabilities 8.8 4. 15. 15. 15. EV/EBITDA 16. 15.2 12. 1.6 8.7 Other long term liabilities..... Growth Operating Income 16.1% 6.2% 9.7% 8.7% 17.1% SOURCES OF FUNDS 1425.9 1576.9 1432.5 1511.2 1616.6 EBITDA -1.9% 5.4% 27.% 12.9% 21.7% Fixed Assets 1227. 1334.1 126.2 182.8 113.3 PAT -4.% 7.2% 38.2% 8.8% 27.1% Investments.1 34. 225.3 225.3 225.3 Profitability Other n-current Assets 67.4 96.2 98.1 12.3 126.3 EBITDA Margin 25.6% 25.4% 29.4% 3.5% 31.7% PBIT Margin 18.3% 17.5% 21.4% 22.8% 24.5% Current Assets 217.7 251.9 29.6 251.1 31.5 PAT Margin 14.3% 14.5% 16.4% 16.9% 18.4% Current Liabilities 86.3 139.3 126.8 15.3 175.8 Stability Net Current Assets 131.4 112.6 82.8.8 134.7 Debt/Equity.2.3.1.1.1 Current Ratio 2.5 1.8 1.7 1.7 1.8 TOTAL ASSETS 1425.9 1576.9 1432.5 1511.2 1616.6 Interest Coverage 1.6 6.3 9.9 16.3 21.
DISCLOSURES/ APPENDIX I. ANALYST CERTIFICATION We, Atul Karwa & Arun Gopalan, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report, (2) part of our compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report by Systematix Shares & Stocks (I) Limited or its Group/associates companies. (3) have taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. Disclosure of Interest Statement Response Analysts holding in the stock Served as an officer, director or employee II. ISSUER SPECIFIC REGULATORY DISCLOSURES, UNLESS SPECIFICALLY MENTIONED IN POINT NO. 9 BELOW: 1. The Research Analyst(s), Systematix Shares & Stocks(I) Limited (SSSIL), Associate of Analyst or his relative does not have any financial interest in the company(ies) covered in this report. 2. The Research Analyst, SSSIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the company (ies) covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his associate, his relative and SSSIL do not have any other material conflict of interest at the time of publication of this research report. 4. The Research Analyst, SSSIL and its associates have not received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, SSSIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for the company (ies) covered in this report. 6. SSSIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in connection with the research report. 7. The Research Analyst has not served as an Officer, Director or employee of the company (ies) covered in the Research report. 8. The Research Analyst and SSSIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details SSSIL, Research Analyst and its associates pertaining to the companies covered in the Research report: Sr. Particulars Yes /.. 1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by SSSIL 2 Whether Research Analyst, SSSIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report 3 Whether compensation has been received by SSSIL or its associates from the company(ies) covered in the Research report 4 SSSIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report 5 Research Analyst, his associate, SSSIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve month 1. There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities. 11. Systematix Shares & Stocks (I) Limited is in a process of seeking registration under SEBI (Research Analyst) Regulations, 214. EXPLANATION TO RATINGS: BUY: TP>15%; ACCUMULATE: 5%<TP<15%; HOLD: -5%<TP<5%; REDUCE: -15%<TP<-5%; SELL: TP<-15% III. DISCLAIMER The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy completeness or correctness. This document is for information purposes only. This report is based on information that we consider reliable, but we do not represent that it is accurate or complete, and one should exercise due caution while acting on it. Descriptions of any company or companies or their securities mentioned herein are not complete and this document is not, and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. All opinions, projections and estimates constitute the judgment of the author as on the date of the report and these, plus any other information contained in the report, are subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. This report is not directed to or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject to SSSIL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. Any unauthorized use, duplication, redistribution or disclosure of this report including, but not limited to, redistribution by electronic mail, posting of the report on a website or page, and/or providing to a third party a link, is prohibited by law and will result in prosecution. The information contained in the Report is intended solely for the recipient and may not be further distributed by the recipient to any third party. SSSIL generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, SSSIL generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. Our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. The views expressed in this research report reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The compensation of the analyst who prepared this document is determined exclusively by SSSIL however, compensation may relate to the revenues of the Systematix Group as a whole, of which investment banking, sales and trading are a part. Research analysts and sales persons of SSSIL may provide important inputs to its affiliated company(ies). Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. SSSIL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report including but not restricted to fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. SSSIL and its affiliates, officers, directors, and employees subject to the information given in the disclosures may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation (financial interest) or act as a market maker in the financial instruments of the company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential material conflict of interest with respect to any recommendation and related information and opinions. The views expressed are those of the analyst and the Company may or may not subscribe to the views expressed therein. SSSIL, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall SSSIL, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. The Company accepts no liability whatsoever for the actions of third parties. The Report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the Report refers to website material of the Company, the Company has not reviewed the linked site. Accessing such website or following such link through the report or the website of the Company shall be at your own risk and the Company shall have no liability arising out of, or in connection with, any such referenced website SSSIL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any technical glitch to present the data. In no event shall the SSSIL be liable for any damages, including without limitation, direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by SSSIL through this presentation. Neither SSSIL, nor any of its other group companies or associates, shall be responsible for any decisions taken on the basis of this report. Investors are advised to consult their Investment and Tax consultants before taking any investment decisions based on this report.. CIN: U65993TN1995PLC31285 : SEBI Regn..: BSE: INB/F11132736 Member Code: 182 NSE: INB/F/E23113273 Member Code : 11327 MCX-SX: INB/F261132733 Member Code: 1756 PMS SEBI Reg. : INP2692 Depository Participant: IN-DP-CDSL-246-4 AMFI: ARN. 64917 Corporate Office Address: A 63-66, The Capital, BKC, Bandra (E), Mumbai, India - 451