February 1, 2012

COMPANY RESULTS

REPORT REVIEW
Analyst Chetan Kapoor +91-22-4322 1232 chetan.kapoor@idbicapital.com

Gateway Distriparks Ltd.

CFS still mainstay, but rail helps sustain turnaround

ACCUMULATE

Summary
Gateway Distriparks (GDL) results were largely in-line recording 23.7% YoY revenue growth to Rs1.95 bn in Q3FY12. EBIDTA margins improved 220bps YoY to 31.8%. PAT grew 19.1% YoY to Rs331 mn for the quarter. CFS segment continued to be the mainstay for profitability improvement despite a fall in CFS volume. CFS realisation increased 30% YoY to Rs9,920/TEU. While Rail segment EBIDTA margin contracted 40bps QoQ to 16.8%, it sustained volume growth of ~24% YoY. With capex resumption, GDL plans to incur ~Rs2.5 bn in expansion of capacities across CFS, ICD rail and cold chain in FY13E. With subdued EXIM scenario, growth prospects in container trade will moderate to lower volume growth in CY12 than the 10%YoY growth achieved in CY11. In this light, the fresh round of capex is concerning. CFS segment, mainstay of the profitability, is likely to sustain realization levels due to higher dwell times in the lean times. Improvement in rail segment EBIDTA margins will slow and seem unlikely to cross 18% in FY13E. An improvement in the macro scenario could warrant improvement in our estimates. At CMP, the stock trades at 10.6x on our FY13E EPS of Rs12.4. We retain our ACCUMULATE rating on the stock with a SOTP based target price of Rs145.

Nifty: 5,236; Sensex: 17,301

CMP Target Price Potential Upside/Downside Key Stock Data Sector Logistics Bloomberg / Reuters GDPL IN / GATE.BO Shares o/s (mn) 108 Market cap. (Rs mn) 14,148 Market cap. (US$ mn) 286 3-m daily average vol. 28,812 Price Performance 52-week high/low -1m Absolute (%) 2 Rel to Sensex (%) (10) Rs153/101 -3m -12m (11) 24 (10) 28 Rs131 Rs145 +11%

Result Highlights
Revenue increased 19% YoY to Rs1.9 bn mainly on the back of 30%YoY increase in realization in CFS segment and 25% increase in volume in the Rail segment. CFS segment recorded 19% YoY growth in revenue despite 8% YoY fall in volume mainly due to realization growth. The rail assets were further sequestered as the revenue grew 25% on similar asset base as last year of 21 rakes. EBIDTA margin for the quarter expanded 220bps YoY to 31.8%;.though on a QoQ basis it fell 250bps. The QoQ contraction in margin was mainly due to the fall in margins in CFS and rail segment. Rail segment almost reached its targeted FY12 EXIM:Domestic mix of 90:10 with the mix standing at 87:13 for Q3FY12.

Shareholding Pattern (%) (Jun-11) Promoters FIIs/NRIs/OCBs/GDR MFs/Banks/FIs Non Promoter Corporate Public & Others Relative to Sensex
150 140 130 120 110 100 90 80 Nov-11 May-11 Dec-11 Apr-11 Jul-11 Jun-11 Oct-11 Feb-11 Mar-11 Jan-12 Aug-11 Sep-11 Feb-12

40.4 28.7 15.5 6.3 9.1

Outlook and Valuation

GDL plans to incur Rs1.3 bn, Rs0.5 bn and Rs0.8 bn capex on Rail, CFS and Cold chain verticals, respectively in FY13E. We believe that further capex in the rail division would depress return ratios (FY11 RoE 11.9%) in the medium term as utilization takes time to pick-up. Also, major portion of capex is envisaged for cold chain segment where a payback of of 4-5 years requires high utilization rates (>95%). Despite these concerns, the CFS segment is likely to remain major cash generator. We maintain that GDL remains one of the preferred plays in the container logistics segment given its first mover advantage in CFS segment and long term viability of rail operations. We retain our ACCUMULATE rating on the stock with SOTP based target price of Rs145. Table: Financial snapshot
Year FY10 FY11 FY12E FY13E Revenue EBITDA EBITDA (%) Adj. PAT EPS (Rs) 5,166 5,991 7,669 8,765 1,249 1,597 2,400 2,635 24.2 26.7 31.3 30.1 791 968 1,254 1,331 7.3 9.0 11.6 12.4 17.8 14.6 11.3 10.6 12.3 8.6 5.7 5.2 11.2 10.9 11.9 12.2

(Rs mn)
PE (x) EV/EBITDA (x) RoE (%) RoCE (%) 8.5 10.3 15.0 15.7

GDPL

Sensex

Source: Capitaline

Source: Company; IDBI Capital Research

Q3FY12 Result Review Gateway Distriparks Ltd.

Table: Financials (consolidated)

Year-end: March Net Sales EBITDA EBITDA margin (%) Other Income Interest Depreciation PBT Tax+minorities PAT PAT margin (%) EPS (Rs) Q3FY11 Q3FY12 YoY (%) 9MFY11 9MFY12 YoY (%) 1,578 467 29.6 56 66 150 307 29 278 17.6 2.6 1,952 622 31.8 31 32 148 473 142 331 17.0 3.1 19.1 (44.1) (50.9) (1.4) 54.0 23.7 33.1 4,254 1,107 26.0 38 162 368 615 18 597 14.0 5.5 5,680 1,861 32.8 31 101 427 1,363 431 931 16.4 8.6 (20.1) (37.6) 16.1 70 2,364.6 55.9 16.8 33.5 68.1 FY11 5,991 1,597 26.7 129 182 502 1,041 44 997 16.6 9.3 FY12E YoY (%) 7,669 2,400 31.3 31 123 614 1,694 441 1,254 16.3 11.6 (75.9) (32.6) 22.3 (15) 899.7 25.7 (1.8) 28.0 50.3 8,765 2,635 30.1 32 130 688 1,849 518 1,331 15.2 12.4

(Rs mn)
FY13E YoY (%) 14.3 9.8 3.2 6.0 12.0 9.1 17.5 6.2 (7.1)

Source: Company; IDBI Capital Research

Table: Segmental consolidated (YoY)

CFS Business Q3FY11 Throughput (TEUs) Realisation per TEU(Rs) Total Income EBIDTA EBIDTA (%) Other Income PBT Tax PAT (after MI) Net PAT Net margin (%) Capital Employed 86,636 7,620 660 328 49.7 13 283 16 267 267 40.4 3,715 Q3FY12 79,347 9,920 787 438 55.7 24 390 120 270 270 34.3 4,253 83.8 37.7 NM 1.1 1.1 YoY (%) (8.4) 30.2 19.2 33.7 Rail Business Q3FY11 34,494 23,294 804 105 13.1 4 3 0 3 3 0.4 6,866 Q3FY12 42,697 23,465 1,002 169 16.8 4 52 1 51 51 5.0 6,909 NM NM (18.2) NM YoY (%) 23.8 0.7 24.7 60.2 114 34 29.5 5.6 23 13 10 10 8.9 1,130 163 46 28.1 3.8 31 20 11 11 6.6 1,226 (32.1) 34.2 NM 5.9 5.9 42.6 35.6 1,578 467 29.6 23 309 29 280 280 17.7 11,711 Q3FY11 Cold Chain Q3FY12 YoY (%) Q3FY11 121,130 GDL Group Q3FY12

(Rs mn)
YoY (%) 0.8 23.7 39.8 36.1 52.9 NM 18.2 18.2

122,044 1,952 653 33.4 31 473 142 331 331 17.0 12,388

Source: Company; IDBI Capital Research

Q3FY12 Result Review Gateway Distriparks Ltd.

Table: Segmental consolidated (QoQ)

CFS Business Q2FY12 Throughput (TEUs) Realisation per TEU(Rs) Total Income EBIDTA EBIDTA(%) Other Income PBT Tax PAT (after MI) Net PAT Net margin (%) Capital Employed 86,890 9,135 794 446 56.2 28 399 123 276 276 34.8 4,360 Q3FY12 79,347 9,920 787 438 55.7 24 390 120 270 270 34.3 4,253 (13.4) (2.3) NM (2.3) (2.3) QoQ (%) (8.7) 8.6 (0.8) (1.7) Rail Business Q2FY12 43,057 22,233 957 165 17.2 3 53 1 51 51 5.3 6,870 Q3FY12 42,697 23,465 1,002 169 16.8 4 52 1 51 51 5.0 6,909 NM NM 33.3 NM QoQ (%) (0.8) 5.5 4.7 2.6 137 36 26.5 4.6 22.7 14.8 7.9 8 5.8 1,200 Q2FY12 Cold Chain Q3FY12 163 46 28.1 4 31 20 11 11 6.6 1,226 (17.4) 36.6 NM 35.4 35.4 18.6 25.9 1,888 647 34.3 35 474 139 335 335 17.8 12,430 QoQ (%) Q2FY12 129,947 GDL Group

(Rs mn)
Q3FY12 122,044 1,952 653 33.4 31 473 142 331 331 17.0 12,388 (10.3) (0.3) NM (1.3) (1.3) 3.4 0.9 QoQ (%) (6.1)

Source: Company; IDBI Capital Research

Concall Highlights
EXIM:Domestic mix for the rail segment stood at 87:13 in Q3FY11. The dwell time at the JNPT CFS increased from 10.5 days in Q2FY12 to 12 days in Q3FY12. Asoti ICD is expected to start operations through road linkage from Feb 2012, though rail linkage is expected to take time. Rail EBIDTA margins likely to remain at 17% levels in FY12E; to improve further in FY13E. However, overhang of the new lower margin short haul locations like Sanand and Jodhpur is likely to limit profitability. Snowman capacity currently stands at 18,250 pallets and has 90% occupancy. The capacity is expected to more than double to 46,000 pallets by FY13. To require capex of about Rs35,000/pallet. PAT margins estimated to be 15-16% at the peak utilization levels of 95%. The current Chennai facility is running at full capacity. The company has set-up another facility at Chennai, effectively doubling its capacity at Chennai from ~80000 TEU earlier. The current rake strength stands at 21 with plans to add another 8 rakes in next one year. Total capex estimated to be Rs2.5 bn in the next one year.

Rail haulage expense constitutes 69% of revenue in the rail segment.

Q3FY12 Result Review Gateway Distriparks Ltd.

Financial Summary
Profit & Loss Account
Year-end: March Net sales Growth (%) Operating expenses EBITDA Growth (%) Depreciation EBIT Interest Paid Other income Pre-tax profit Tax Effective tax rate (%) Net profit Adjusted net profit Growth (%) Shares o/s (mn nos) FY10 5,166 14.6 (3,917) 1,249 (14.5) (455) 794 (195) 125 724 79 (11.0) 803 791 (0.5) 108 FY11 5,991 16.0 (4,394) 1,597 27.8 (502) 1,094 (182) 129 1,041 (44) 4.2 997 968 22.2 108 FY12E 7,669 28.0 (5,269) 2,400 50.3 (614) 1,786 (123) 31 1,694 (441) 26.0 1,254 1,254 29.6 108

(Rs mn)
FY13E 8,765 14.3 (6,130) 2,635 9.8 (688) 1,947 (130) 32 1,849 (518) 28.0 1,331 1,331 6.2 108

Cash Flow Statement

Year-end: March Pre-tax profit Depreciation Tax paid Chg in working capital Other operating activities Cash flow from operations (a) Capital expenditure Chg in investments Other investing activities Cash flow from investing (b) Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Chg in minorities Other financing activities Cash flow from financing (c) Net chg in cash (a+b+c) FY10 724 444 82 269 1,518 (1,014) 80 (934) 40 55 (504) 8 19 (383) 201 FY11 1,041 360 (92) (94) 1,215 (1,489) 20 (1,469) 24 (945) (1,008) 2,913 167 1,151 897 FY12E 1,694 614 (441) (376) 1,492 (694) 130 (564) (419) 146 (532) 82 (723) 205

(Rs mn)
FY13E 1,849 688 (518) 15 2,034 (1,501) (1,501) (732) 50 (682) (149)

Balance Sheet
Year-end: March Net fixed assets Investments Current assets Sundry Debtors Cash and Bank Loans and advances Total assets Shareholders' funds Share capital Reserves & surplus Total Debt Unsecured loans Other liabilities Curr Liab & prov Current liabilities Provisions Total liabilities Total equity & liabilities Book Value (Rs) FY10 8,702 150 2,003 682 795 503 10,855 7,262 1,079 5,558 2,099 2,099 2,287 1,342 1,307 35 3,593 10,855 67 FY11 9,831 130 2,881 624 1,506 706 12,843 10,445 1,080 5,797 1,154 1,154 1,294 1,538 1,105 433 2,399 12,843 97 FY12E 9,911 3,408 946 1,757 706 13,320 10,629 1,080 5,899 1,300 1,300 1,440 1,251 1,251 2,690 13,320 99

(Rs mn)
FY13E 10,724 3,394 1,081 1,608 706 14,119 11,278 1,080 6,498 1,300 1,300 1,440 1,401 1,401 2,840 14,119 105

Financial Ratios
Year-end: March Adj EPS (Rs) Adj EPS growth (%) EBITDA margin (%) Pre-tax margin (%) ROE (%) ROCE (%) Turnover & Leverage ratios (x) Asset turnover (x) Leverage factor (x) Net margin (%) Net Debt / Equity (x) Working Capital & Liquidity ratio Inventory days Receivable days Payable days 0 48 95 0 38 56 0 45 73 0 45 71 0.5 1.5 15.3 0.2 0.5 1.3 16.2 0.0 0.6 1.2 16.3 0.0 0.6 1.3 15.2 0.0 FY10 7.3 (0.5) 24.2 14.0 11.2 8.5 FY11 9.0 21.9 26.7 17.4 10.9 10.3 FY12E 11.6 29.9 31.3 22.1 11.9 15.0 FY13E 12.4 6.2 30.1 21.1 12.2 15.7

Valuation
Year-end: March P/E (x) Price / Book value (x) PCE (x) EV / Net sales (x) EV / EBITDA (x) Dividend Yield (%) FY10 17.8 1.9 11.3 3.0 12.3 2.7 FY11 14.6 1.4 9.6 2.3 8.6 4.6 FY12E 11.3 1.3 7.6 1.8 5.7 4.6 FY13E 10.6 1.3 7.0 1.6 5.2 4.6

Source: Company; IDBI Capital Research 4

Q3FY12 Result Review Gateway Distriparks Ltd.

Notes

Sonam H. Udasi Head Research Dealing

(91-22) 4322 1375 (91-22) 6637 1150

sonam.udasi@idbicapital.com dealing@idbicapital.com

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