Logistics August 07, 2014

Gateway Distriparks
Bloomberg: GDPL IN
Reuters: GATE.BO

HOLD


Institutional Equities
India Research

RESULT REVIEW






Recommendation
CMP: Rs239
Target Price: Rs265
Previous Target Price Rs256
Upside (%) 11%
Stock Information
Market Cap. (Rs bn / US$ mn) 26/422
52-week High/Low (Rs) 254/98
3m ADV (Rs mn /US$ mn) 81/1.3
Beta 0.8
Sensex/ Nifty 25,665/7,672
Share outstanding (mn) 109
Stock Performance (%)
1M 3M 12M YTD
Absolute (2.7) 37.4 128.1 70.3
Rel. to Sensex (1.6) 20.5 66.5 40.5
Performance

Source: Bloomberg
Earnings Revision
(%) FY15E FY16E FY17E
Sales -1.1% -0.7% -0.1%
EBITDA +0.5% -1.6% +2.0%
PAT +3.0% +1.2% +3.6%
Source: Karvy Institutional Research
Analysts Contact
Rajesh Kumar Ravi
022 6184 4313
rajesh.ravi@karvy.com




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Sensex (LHS) Gateway Distriparks (RHS)
On the Right Track
Results in-line: Gateways (GDPL) 1QFY15 consolidated Sales, EBITDA &
PAT rose 13%, 20% & 23% YoY respectively to Rs2.83 bn, Rs782 mn & Rs369
mn (vs our growth estimates of 19%, 19% and 21%). While the CFS
profitability has stabilized, rail business has been leading the profit growth
ably supported by traction in the cold chain business.
Rail business continues to speed up profitability- Rail EBITDA & PAT rose
45% and 144% YoY driven by 11% increase in throughput and 558bps
operating margin expansion to 22.4%. Operating margin benefitted from both
volume growth as well as cost optimization. The cold chain EBITDA rose
25% YoY driven by pallet expansion. The fast pace of expansion has near
term negative impact on operating margin which contracted 323bps YoY. The
CFS profitability has stabilized and is recovering. While EBITDA rose 1%
YoY, it grew 14% QoQ driven by (1) higher volumes at JNPT & Chennai CFS,
(2) increase in value added service offerings to reduce competition (3)
increase in profitability at Vizag and Kochi CFS.
Growth momentum to continue: We expect CFS EBITDA to rise at +7%
CAGR during FY14-17E vs 15% decline rate during FY13 and FY14. This
would be driven by increase in EXIM trade and 20% capacity expansion of
JNPT port (0.8 mn TEUs) in 1QFY16 both of which should moderate
competitive pressure for CFS operators. Further, volume growth at other CFS
should boost its profitability. Rail business should gain from overall
improvement in EXIM trade as well as the commencement of Rail operations
from Faridabad from 2QFY15. These should drive its 31% EBITDA CAGR
during FY14-17E. We expect Cold chain EBITDA to grow at 25% CAGR
driven by volume growth and margin expansion as the business stabilizes.
Maintain HOLD: Overall, we expect Gateway to deliver 21% and 12%
EBITDA and PAT CAGRs during FY14-17E. We have marginally increased
PAT estimates by 3%/1.2%/3.6% for FY15/16/17E as we factor in (1) slightly
higher volume growth in CFS & Rail (2) increase depreciation rate by ~80bps
and (3) increase interest expense by 20-25% (4) lower tax rates across the
three segments. We maintain our HOLD recommendation on the stock
with a TP of Rs265 (earlier Rs256) valuing it at 15x FY17E EPS.
Financial Summary (Consolidated)
Y/E Mar (Rs mn) FY13 FY14P FY15E FY16E FY17E
Net Sales 9,497 10,127 12,060 14,149 16,908
EBITDA 2,397 2,609 3,221 3,740 4,576
EBITDA margin (%) 25.2 25.8 26.7 26.4 27.1
PAT (Rs) 1,265 1,383 1,672 1,720 1,911
EPS (Rs) 11.7 12.8 15.4 15.9 17.6
RoE (%) 11.1 11.6 13.5 13.1 13.4
RoCE (%) 13.5 12.7 14.6 17.2 21.3
P/E (x) 20.5 18.7 15.5 15.0 13.5
EV/EBITDA (x) 11.5 10.6 8.8 7.3 5.6
Source: Company, Karvy Institutional Research



2
August 07, 2014
Gateway Distriparks

Quarterly Review
Exhibit 1: Quarterly Review 1QFY15
Consolidated (Rs mn) Jun-13 Mar-14 Jun-14 YoY % QoQ %
Revenue 2,498 2,715 2,827 13.2 4.1
CFS business 742 742 803 8.1 8.1
Rail business 1,408 1,528 1,529 8.6 0.0
Cold chain 348 444 496 42.4 11.6
EBITDA 649 740 782 20.4 5.6
CFS business 318 281 321 0.9 14.1
Rail business 237 355 343 44.6 (3.6)
Cold chain 94 103 118 25.3 13.9
Total OPM (%) 26.0 27.3 27.6 166 38
Depreciation 195 199 249 27.6 25.3
Interest cost 61 76 83 35.5 8.9
PBT 393 465 449 14.4 (3.4)
Tax 60 5 67
Minority 33 32 14
Net PAT 300 428 369 23.1 (13.7)
CFS business 185 167 164 (11.3) (2.0)
Rail business 79 229 193 144.1 (15.7)
Cold chain 37 32 13 (64.9) (59.9)
EPS (Rs) 2.78 3.96 3.42 23.1 (13.7)
NPM (%) 12.0 15.8 13.1 105 (270)
Source: Company, Karvy Institutional Research
Exhibit 2: Operational Analysis 1QFY15
Jun-13 Mar-14 Jun-14 YoY % QoQ %
CFS Volumes (K TEUs) 84.22 88.07 96.55 14.6 9.6
CFS Realization (Rs per TEU) 8,813 8,428 8,312 (5.7) (1.4)
CFS EBITDA (Rs per TEU) 3,781 3,195 3,327 (12.0) 4.1
CFS EBITDA (%) 42.9% 37.9% 40.0% (7) 211
Rail Volumes (K TEUs) 51.62 58.18 57.38 11.1 (1.4)
Rail Realization (Rs per TEU) 27,270 26,263 26,638 (2.3) 1.4
Rail EBITDA (Rs per TEU) 4,591 6,109 5,971 30.1 (2.3)
Rail EBITDA (%) 16.8% 23.3% 22.4% 558 (85)
Cold Chain OPM (%) 27.0% 23.3% 23.8% (323) 48
Source: Company, Karvy Institutional Research

Exhibit 3: Estimates Revision Summary

FY15E FY16E FY17E Comments
(Rs mn) New Est Change New Est Change New Est Change

Revenues 12,060 -1.1% 14,149 -0.7% 16,908 -0.1%
Increased volumes for CFS & Rail by 1-2% while lowered
NSR by ~2% each
EBITDA 3,221 0.5% 3,740 1.6% 4,576 2.0%
Lowered cost estimates by 1% thereby leading to higher
margins
PAT 1,672 3.0% 1,720 1.2% 1,911 3.6%
Increased depreciation rate by ~80bps, increased interest costs
estimates by 20-25%, lowered tax out go by 35-40%
Source: Karvy Institutional Research



3
August 07, 2014
Gateway Distriparks

Outlook & Valuations
Capex guidance of Rs2.2 bn in FY15: Gateway expects to incur capex of Rs1.3 bn
in the cold chain segment for 30% pallet capacity increase in FY15E, Rs750mn in
Rail segment a large part of this would be towards land acquisition near
Ahmedabad in Gujarat for a new ICD and Rs200mn in the CFS segment for
equipment up-gradation/ additions. The Snowman IPO is expected be launched in
2QFY15 and the IPO proceeds of Rs150 mn would be used for on-going capex and
to partially pay-off bridge loans taken towards these capex.
Balance sheet position: Company incurred capex of Rs450 mn during the quarter -
Rs170 mn in CFS, Rs30 mn in Rail and Rs250 mn in Cold chain. During 1QFY15,
gross debt increased by Rs419 mn QoQ to Rs3.7 bn. Cash and liquid investments
rose Rs56mn QoQ to Rs1.55 bn.
Profit Momentum to continue: We expect CFS EBITDA to rise at +7% CAGR
during FY14-17E vs 15% decline CAGR during FY12-14. This would be driven by
increase in EXIM trade and 20% capacity expansion of JNPT port in 1QFY16 both
of which should moderate competitive pressure for CFS operators. Further,
volume growth at other CFS should boost its profitability. Rail business should
gain from overall improvement in EXIM trade as well as the commencement of
Rail operations from Faridabad from 2QFY15. These should drive its 31% EBITDA
CAGR during FY14-17E. We expect Cold chain EBITDA to grow at 25% CAGR
driven by volume growth and margin expansion as the business stabilizes.
Overall, we expect Gateway to deliver 21% and 12% EBITDA and PAT CAGRs
during FY14-17E. We have marginally increased PAT estimates by 3%/1.2%/3.6%
for FY15/16/17E as we factor in (1) slightly higher volume growth in CFS & Rail (2)
increase depreciation rate by ~80bps and (3) adjust downwards tax rates across the
three segments. We maintain our HOLD recommendation on the stock with a
TP of Rs265 (earlier Rs256) valuing it at 15x FY17E EPS.
Exhibit 4: Key operational estimates/ assumptions

FY12 FY13 FY14 FY15E FY16E FY17E
CFS Volumes (K TEUs) 334.1 342.6 340.0 373.3 395.2 425.2
YoY growth (%) 0.2 2.6 (0.8) 9.8 5.9 7.6
CFS Realization (Rs/ TEU) 9,586 9,198 8,871 8,806 8,984 9,165
YoY growth (%) 32.5 (4.0) (3.6) (0.7) 2.0 2.0
CFS OPM 54.8 47.9 41.9 40.3 40.2 39.6
Rail Volumes (K TEUs) 180 234 212 244 281 328
YoY growth (%) 37.4 29.4 (9.1) 15.1 15.0 16.5
Rail Realization (Rs/ TEU) 23,283 23,136 26,988 28,275 29,689 31,556
YoY growth (%) (1.7) (0.6) 16.6 4.8 5.0 6.3
Rail OPM 17.1 15.3 19.5 22.4 22.4 24.0
Cold chain Pallets (K TEUs) 18.0 46.0 62.0 86.0 96.0 106.0
YoY growth (%) 11.1 155.6 34.8 38.7 11.6 10.4
Cold Chain Revenues (Rs mn) 642 1,141 1,552 2,050 2,460 2,902
YoY growth (%) 36.6 77.7 36.1 32.0 20.0 18.0
Cold Chain OPM 24.5 22.7 25.7 26.0 26.5 26.8
Source: Company, Karvy Institutional Research


4
August 07, 2014
Gateway Distriparks

Financials
Exhibit 5: Profit & Loss Statement (Consolidated)
Y/E Mar (Rs mn) FY13 FY14 FY15E FY16E FY17E
Net Revenues 9,497 10,127 12,060 14,149 16,908
% growth 16 7 19 17 20
Operating expenditure 7,100 7,518 8,839 10,408 12,332
EBITDA 2,397 2,609 3,221 3,740 4,576
% growth (2) 9 23 16 22
Depreciation 699 801 1,042 1,109 1,141
Other income 197 171 189 207 228
EBIT 1,896 1,979 2,368 2,839 3,663
Interest expenditure 164 279 309 232 170
PBT 1,732 1,700 2,059 2,607 3,493
Tax 373 203 297 388 468
Minority interest 93 114 91 499 1,114
Adjusted PAT 1,265 1,383 1,672 1,720 1,911
% growth (4) 9 21 3 11
Source: Company, Karvy Institutional Research

Exhibit 6: Balance Sheet (Consolidated)
Y/E Mar (Rs mn) FY13 FY14 FY15E FY16E FY17E
Cash & liquid investments 928 1,582 616 1,199 2,572
Debtors 964 1,136 1,306 1,436 1,580
Inventory - - - - -
Loans & advances 798 1,013 962 1,069 1,189
Other current assets 196 211 233 257 283
Investments LT - - - - -
Gross Block 15,097 16,736 18,446 18,896 20,216
Net Block 11,706 12,544 13,213 12,554 12,733
CWIP 564 564 1,064 1,064 464
Total assets 15,155 17,050 17,394 17,578 18,820
Current liabilities & provisions 898 1,634 1,479 1,517 1,559
Debt 2,520 3,241 3,200 2,500 2,200
Total liabilities 3,418 4,875 4,679 4,017 3,759
Deferred tax liabilities 88 40 40 40 40
Minority Interest 3,764 3,879 3,970 4,469 5,583
Shareholders' equity 1,083 1,083 1,083 1,083 1,083
Reserves & surpluses 6,802 7,173 7,622 7,969 8,355
Total networth 7,885 8,256 8,705 9,052 9,438
Total networth & liabilities 15,155 17,050 17,394 17,578 18,820
Source: Company, Karvy Institutional Research




5
August 07, 2014
Gateway Distriparks


Exhibit 7: Cash Flow Statement (Consolidated)
Y/E Mar (Rs mn) FY13 FY14 FY15E FY16E FY17E
PBT 1,733 1,700 2,059 2,607 3,493
Depreciation 688 801 1,042 1,109 1,141
Interest 164 279 309 232 170
Tax paid (285) (250) (297) (388) (468)
(Incr) / decr in net WC (264) 333 (296) (222) (249)
Others (104) (171) (189) (207) (228)
Cash flow from operating activities 1,933 2,693 2,628 3,130 3,859
(Incr) / decr in capital expenditure (2,383) (1,640) (2,210) (450) (720)
(Incr) / decr in investments 296 (340) - - -
Others 155 171 189 207 228
Cash flow from investing activities (1,932) (1,808) (2,021) (243) (492)
Incr / (decr) in borrowings 1,240 721 (41) (700) (300)
Issuance of equity 22 - - - -
Dividend paid (1,260) (1,012) (1,223) (1,372) (1,525)
Others (148) (279) (309) (232) (170)
Cash flow from financing activities (146) (570) (1,572) (2,305) (1,995)
Net change in cash (145) 314 (965) 583 1,373
Source: Company, Karvy Institutional Research
Exhibit 8: Key Ratios
Y/E Mar (%) FY13 FY14 FY15E FY16E FY17E
EBITDA margin 25.2 25.8 26.7 26.4 27.1
EBIT margin 20.0 19.5 19.6 20.1 21.7
Net profit margin 13.3 13.7 13.9 12.2 11.3
Net debt: equity 0.1 0.1 0.2 0.1 (0.0)
Working capital turnover 0.1 0.1 0.1 0.1 0.1
RoCE 13.5 12.7 14.6 17.2 21.3
RoIC 12.3 12.8 13.9 16.0 21.5
RoE 11.1 11.6 13.5 13.1 13.4
Source: Company, Karvy Institutional Research, Valuation Parameters

Exhibit 9: Valuation Parameters
Y/E Mar FY13 FY14 FY15E FY16E FY17E
EPS (Rs) 11.7 12.8 15.4 15.9 17.6
DPS (Rs) 7.0 7.0 8.5 9.5 10.6
Book value per share (Rs) 108 112 117 125 139
P/E (x) 20.5 18.7 15.5 15.0 13.5
P/BV (x) 2.2 2.1 2.0 1.9 1.7
EV/EBITDA (x) 11.5 10.6 8.8 7.3 5.6
EV/Sales (x) 2.9 2.7 2.4 1.9 1.5
Source: Company, Karvy Institutional Research





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Disclosures Appendix

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Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5 - 15%
Sell : < 5%