Sharekhan's research report on Gateway DistriparksFor Q3FY2016, Gateway Distriparks Ltd (GDL)’s consolidated adjusted earnings after minority interest and associate income declined by 43.1% YoY to Rs30.9 crore. The consolidated revenues were affected by lower volumes in container freight station (CFS; down 10.4% YoY) and rail (down 20.0% YoY) divisions. The volume off-take was primarily affected by Chennai floods, lower & imbalanced export-import trade and market shrinkage. Further, increased railway haulage charges and increasing competitive intensity pressuring realisations resulted in over 1,000-BPS erosion in operating profit margin (OPM) for both CFS and rail divisions. Consequently, the operating profit for the quarter declined by 27.1% YoY to Rs61.9 crore. We had in our report dated December 22, 2015 highlighted on GDL’s earnings for H2FY2016 to be affected on weak demand environment which we believe can put further pressure on GDL’s valuation in the near term. We have revised our estimates for FY2016 and FY2017 factoring lower volume and margin erosion in rail and CFS divisions (we have introduced FY2018 estimate in this note). However, we believe the structural growth story over the long term remains intact for GDL (owing to a range of services, leadership position in the CFS and rail businesses and a healthy balance sheet). Thus, we have maintained our Buy rating on the stock of GDL with a revised price target of Rs345. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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