HDFC Securities' research report on Gateway Distriparks
We upgrade Gateway Distriparks (GDL) to BUY (from ADD earlier) as the company has completed its fundraise, the proceeds of which will be used to deleverage the balance sheet. We expect the gearing ratio to reduce to ~0.5x in FY21E (from 0.7x) as GDL repays Rs 1.15bn of high-cost NCDs. The company is also in the process of simplifying its group structure with plans to merge the Rail business and the CFS operations under a single umbrella, which will drive operational synergies. The much-awaited Dedicated Freight Corridor (DFC) stretch between Haryana (Rewari) to Gujarat (Palanpur) of 650kms is expected to be commissioned by CY20 as trial runs have commenced. This will lead to a 10% increase in productivity of the operators at a time when EXIM traffic volumes are improving from trough levels (+40% QoQ).
Outlook
We set a revised Sep-22 target price of Rs 125. We value the Rail business at 8.5x EV/EBITDA (8x earlier) to factor in the improving demand outlook.
For all recommendations report, click here
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