Hold Gateway Distriparks, target price Rs 88: ICICI Securities

ICICI Securities has given a hold rating to Gateway Distriparks with a target price of Rs 88. The share price moved up by 2.65 per cent from its previous close of Rs 90.60. The last traded stock price is Rs 93.

Increase in rail volumes (17 per cent year on year) along with an impressive EBITDA/teu was the highlight of Gateway Distriparks’ (GDL) Q4FY20 result. CFS volume/EBITDA decline (22/32 per cent year on year) largely offset the surprise in the rail segment. According to the brokerage, nNet debt stays elevated at Rs 7.5 billion, which management has guided to reduce to less than Rs 4 billion by FY21E-end – an achievement which will be construed as a major positive.

Investment Rationale

According to the brokerage, the path to desired deleveraging may involve equity issuance. The management did guide for about 70 per cent of FY20 volumes to be achieved in FY21E; also the company expects to maintain Rs 6,000/teu of EBITDA/teu in rail business. The brokerage has increased FY22 rail margin assumption to reflect it.

According to the brokerage, stretched balance sheets and a weak external market are constraints currently. Gateway Distriparks’ strategy always involved setting up of satellite terminals around Garhi (which contributes ~65 per cent to its rail volumes) to capture additional market share. Blackstone’s exit was ideally suited to ramp-up investments, delayed by two constraints (capital structure and weak external market). Even without DFC commissioning, management expects to capture 15-20 per cent of EXIM container traffic traversing via road and entering the extended NCR market

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 299.08 crore, up .05 per cent from last quarter sales of Rs 298.93 crore and up 149.36 per cent from last year's same quarter sales of Rs 119.94 crore. The company reported net profit after tax of Rs 11.12 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 30.17 per cent stake in the company as of March 31, 2020, while FIIs held 27.19 per cent, DIIs 29.5 per cent and public and other 13.14 per cent.