Reduce Gateway Distriparks; target of Rs 85: Dolat Capital

Dolat Capital's research report on Gateway Distriparks

GDPL reported good performance. Sales (Rail+CFS) declined by 20% YoY to Rs 2.5Bn, driven by a 25% decline in the rail segment, while CFS reported a decline of 5%. CFS volume fell ~40% YoY, while Rail volumes fell 22% YoY. EBITDA was at Rs 699mn, up 28% YoY (Adj of SEIS income in Q1FY20), due to a rise of 14% YoY in rail and 53% YoY in the CFS segments. Overall margins were 27.6%, driven by better operating cost efficiency. CFS/rail reported margins of 30.2%/25.8%, respectively. PAT stood at Rs 111mn down 51% YoY. The management highlighted the following: (1) Company paid Rs 1.35Bn during the quarter towards NCD (2) Most proceeds from announced Right issue of Rs 1.16Bn will be used for debt repayment (3) Accrued ground rent and increase in dwell time benefited the segments along with evacuation of imports at ICD (4) Rail freight unlikely to increase in near term due to intense competition and over supply (5) Rs 1.2Bn capex in next 2 years (6) Gross debt at Rs 6.6Bn and net debt at Rs 6.2Bn (7) Sharp surge in demand for high quality temperature-controlled warehousing resulted higher utilization (90%) which benefitted Snowman.

Outlook

We have taken rights issue into consideration and reduced the debt accordingly. We maintain our reduce rating on the stock with SOTP based tp of 85.