gateway dis trip arks limited_initiating coverage
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GATEWAY DISTRIPARKS LTD. (GDL)Initiating Coverage - ACCUMULATE
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AnalystAnalystAnalystAnalystRajiv Rajiv Rajiv Rajiv BharatiBharatiBharatiBharati
rajiv.bharati@destimoney.com
Gateway Distriparks– ACCUMULATE with an upside target of 10%
ACCUMULATETARGET : `136
CMP : `124
Key Data
Ticker (Bloomberg) GDPL
NSE Code GDL
BSE Code 532622
Sector Logistics
Industry
Face Value (`) 10
Book Value per share (`) 64
Dividend Yield (%) 4.8%
52 Week Range (`) 101-153
Market Cap. (` mn.) 13,436
Logistics
( In ` mn)( In ` mn)( In ` mn)( In ` mn) FY10 FY11 FY12E FY13E
Net Sales 5,166 5,991 7,819 8,479
EBITDA 1260 1609 2431 2520
EBITDA Margin 24% 27% 31% 30%
EPS (`) 7.3 8.9 12.4 13.3
EV/Sales 2.5 2.2 1.7 1.5
EV/EBITDA 10.4 8.1 5.4 5.2
P/E (x) (` 124.05) 17.0 13.9 10.0 9.3
Price Performance CY08 CY09 CY10 CY11
Absolute -45% 65% -14% 15%
Relative 6% -11% -32% 38%
Source: Company, Bloomberg, Destimoney Research
2
Shareholding Pattern as on 30 Sep 2011 Relative Stock Performance (Dec'10=100)
Market Cap. (` mn.) 13,436 Relative 6% -11% -32% 38%
Promoters40%
MF/UTI/FIs/Insurance
Co.14%
FIIs28%
Individuals8%
Bodies Corporate
8%
Others2%
70
100
130
160
Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11
GDL NIFTY
� Gateway Distriparks Limited (GDL) is the largest private sector player in India providing port related logistics
support services. The company provides services for handling and clearance of sea borne export-import
trade in containerized form through transit facilities located near ports or in the interiors of the country.
� CFS (Container Freight Stations) business is the main cash generating segment for GDL. It contributed 40%
of revenue in FY11 and has operating margin of ~50%. We expect this segment to remain under pressure
as the recent growth has primarily been price led. Lower throughput in port volumes due to prevailing
macroeconomic situation might have negative impact in the medium term.
� Volume growth in the Rail Segment is expected to surge with incremental diversion of rakes on domestic
circuit to EXIM circuit, coupled with operationalization of Asaoti ICD (Inland Container Depots). The
Volume growth to be driven by new capacities, pricing to come under pressure
circuit to EXIM circuit, coupled with operationalization of Asaoti ICD (Inland Container Depots). The
segment has turned in black recently which got further bolstered by reduction in interest burden after the
inflow of capital from Blackstone group.
� GDL with its Snowman vertical caters to the burgeoning demand in the Cold Storage Logistics space. The
company is planning to expand its capacity by 2.6x from the present 18,000 pallets. Currently, contributing
8% to topline, we expect this segment to generate stable cash flows in future.
� Logistics sector being closely linked to GDP growth; government’s and RBI’s focus on curbing inflation at the
cost of industrial growth coupled with deteriorating global economic condition could start reflecting in
international trade with India in the medium term. We remain cautious on sudden fall in demand for
finished product which could impact the containerized cargo volumes in India. Therefore, we initiate
coverage on GATEWAY DISTRIPARKS with a ACCUMULATE rating and a target price of `̀̀̀136 per share.
3
GDL operates in three fast growing segments…
Cold Chain Logistics
� Temperature controlled logistics solution connecting over 100 cities and distributing to more than 4400 outlets.
� Current capacity of 18,000
Rail & ICD
� Currently the company has 21 operational rakes.
� 3 ICD (Inland Container Depots) currently operational
� Garhi (Gurgaon) -100,000 TEUs
CFS1
� Extended arm to ports helping decongestion of ports, faster paper work and other value added services (kitting, stuffing, de-stuffing etc).
GDL’s business verticals
4
� Current capacity of 18,000 pallets, to be expanded to 47,000 by the end of FY13.
100,000 TEUs
� Sanewal (Ludhiana) –180,000 TEUs
� Kalamboli (Mumbai)
� Another one coming up in Asaoti (Faridabad) with 120,000 TEUs
etc).
� 4 CFSs with total Capacity of 600,000 TEUs.
� Two at JNPT (366,000 TEUs)
� CFS Chennai (85,000 TEUs)
� CFS Vizag (149,000 TEUs)
� Another one coming up in Cochin with 50,000 TEU capacity
Source: Company
1refer Annexure I
…which they have acquired over the years…
1994• Incorporated in 1994, the company is a JV between India based Newsprint Trading & Sales Corp (NTSC-
30%), Singapore based Thackeral Grp, Windmill Corp, Parameshwara Holdings
1998-2003
• Phase 1 (1998), began operation with 48,000 TEUs annual capacity
• Phase 2 (2001), expanded capacity to 120,000 TEUs
• Phase 3 (2003), expanded it further to 180,000 TEUs
2004
• Acquired ICD at Garhi Harsaru in Gurgaon for `177.5 mn
• Acquired 60% stake in Gateway East India Ltd.
• Acquired 100% stake in Indev Warehouse and Container Services Pvt Ltd, A CFS at Chennai, for `270 mn
5
• Acquired 100% stake in Indev Warehouse and Container Services Pvt Ltd, A CFS at Chennai, for `270 mn
2005-2006
• Signed an agreement with Concor to jointly work on development of EXIM trade
• Acquired 100% stake in Gateway Rail Freight Pvt Ltd (GRFL).
• Acquired 60% stake in Gateway Distriparks (Kerala) Pvt Ltd. Chakiat Agencies holds the balance 40% .
• Entered cold chain logistics business by acquiring 50.1% in Snowman Frozen Foods Ltd.
2007• GRFL signed a 20 yrs agreement with Indian Railways to operate train on Indian Railway Network.• Entered into 15 yrs operate and management agreement with Punjab Conware for its CFS as Nhava Sheva.
2009 • Blackstone Group acquired 37.5% stake in GRFL for `3bn.
Source: Company
…partnering with incumbent players to expand the umbrella of offering
CFS Dronagiri
(Navi Mumbai)
Punjab Conware CFS
(Navi Mumbai)
Gateway Distriparks Ltd.
Gateway East India Gateway Distripark Gateway Distriparks Gateway Rail Snowman
6
Source: Company
Gateway East India Pvt Ltd
CFS Vizag, 100% Subsidiary
Gateway Distripark(South) Pvt Ltd
CFS Chennai, 100% Subsidiary
Gateway Distriparks (Kerala) Limited
CFS Cochi, 60% Subsidiary
Gateway Rail Freight Ltd
97% Subsidiary
Container Gateway Limited
51% Subsidiary
Snowman Logistics Limited
52% Subsidiary
GDL’s growth is closely linked to…
CFS40%
Rail52%
Snowman8%
Revenue Breakup – FY11 = `̀̀̀5,991 mn
CFS36%
Rail53%
Snowman11%
Revenue Breakup – FY13 = `̀̀̀8,479 mn
7
0%
25%
50%
75%
100%
Jun
-08
Sep
-08
Dec-
08
Mar-
09
Jun
-09
Sep
-09
Dec-
09
Mar-
10
Jun
-10
Sep
-10
Dec-
10
Mar-
11
Jun
-11
Sep
-11
CFS Rail Snowmann
Source: Company, Destimoney Research
8%
Quarterly revenue breakup
…EXIM trade in India...
-150
0
150
300
450
EXIM trade in India in $bn
8
� Cumulative trade (exports + imports) in H1FY12 is already at 62.3% of cumulative trade in FY11
� Trade data reflects exports breaching $300 bn mark in FY12.
-150
FY9
9
FY0
0
FY0
1
FY0
2
FY0
3
FY0
4
FY0
5
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
H1
FY1
2
EXIM Balance($bn) Imports($bn) Exports ($bn)
Source: Bloomberg
…which in turn is coupled to economic growth
Transportation62%
Freight Forwarding
8%
Value Added Logistics ServicesWarehousing
75
120
Indian logistics market 2009 - Activity wise breakupIndian Logistics Industry Revenue($ mn)
9
Logistics Services4%
Warehousing26%
Source: Frost & Sullivan
2009 2014
� Indian Logistics Industry revenue is expected to grow at 9.9% CAGR between 2009-2014.
� Industry with widespread consumer base but limited production base like oil & gas, pharma, minerals, food
processing and FMCG are driving up the demand for multimodal transportation services.
� Integrated logistics park demand from Pharma, FMCG, food processing and agricultural sector have made
warehousing a significant part of the logistics industry in India.
Though clearance to the plan of debottlenecking of JNPT port bodes well for the EXIM trade in long run…
7,000
14,000
21,000
28,000
…10 year plan for ports by Shipping Ministry (Container Volume in ‘000 TEUs)
…Incremental container traffic movement towards neighboring ports owing to capacity constraint at
JNPT (in ‘000 TEUs)
307
110
209 118
304
145 159
10
� Lower absorption of incremental container traffic at JNPT has resulted in shipping lines shifting to other
neighboring ports
� In light of the changing dynamics, JNPT has given final approval to PSA-ABG Shipyard JV’s bid to build 4th
terminal at JNPT. This will expand the current capacity of JNPT to 11 mn TEUs by 2016 thereby catapulting
the volumes at the busiest Indian port and paving way for future expansion.
0
20
04
-05
20
05
-06
20
06
-07
20
07
-08
20
08
-09
20
09
-10
20
10
-11
20
15
-16
20
19
-20
Source: Media Sources, Indian Ports Association
73 307
2009-2010 2010-2011
Chennai JNPT Mundra Pipavav
…we expect lower GDP growth to impact EXIM volumes and container traffic…coupled with looming pricing pressure in CFS segment
…revenue growth is attributed to improvement in realization…
0%
16%
32%
48%
64%
-12%
-6%
0%
6%
12%
…muted volume growth is attributed to congestion on JNPT and Chennai facilities…
0
3000
6000
9000
12000
0
1000
2000
3000
4000
11
� In H1FY12, CFS business has seen sharp jump in revenues attributed primarily to improvement in realization
post the tariff revision in Q1FY12 by GDL.
� Though volume growth is expected to remain muted in H2FY12 as well, we expect commencement of
operation at Cochin port to provide the much needed respite.
� Lower GDP growth is expected to cast its shadow on EXIM volumes in coming quarters, we expect the
utilization to deteriorate a little resulting to a dip in operating margins.
Source: company, Destimoney Research
FY09 FY10 FY11 FY12E FY13E
Throughput growth rate (LHS) Operating Margin (RHS)
00
FY09 FY10 FY11 FY12E FY13E
CFS Revenue-in Rs. mn (LHS) Average Rev/TEU-in Rs. (RHS)
In the Rail Segment, growth in the recent past is mainly volume led and is now hinged to success of Asaoti terminal which might take 12-15 months to stabilize
0
7500
15000
22500
30000
0
1200
2400
3600
4800
…better utilization on EXIM route will compensate for drop in per average revenue per
TEU on rail vertical for GDL…
60% 50% 51%67% 57% 64% 70% 75% 76%
40% 50% 49%33% 43% 36% 30% 25% 24%
09
09
10
10
10
10
11
11
11
…Volume led growth based on shifting traffic from Domestic to EXIM route…
12
� Rail segment has become profitable recently also helped by the lowering of interest cost burden after theinduction of Blackstone Group as equity partner with 37.5% stake.
� Higher TEUs per rake and more trips per month will lead to better utilization of rake on EXIM route therebycompensating for per TEU drop in revenue as compared to domestic circuit.
� Though the new ICD terminal at Asaoti with 120,000 TEU capacity will help improve the volumes, stabilizationof the same will take time resulting in pressure on volume growth in the medium term.
� Empty running while travelling towards port on account of massive export-import gap in India remains a causeof concern.
FY09 FY10 FY11 FY12E FY13E
Rail Revenue-in Rs. mn (RHS) Average Rev/TEU-in Rs. (LHS)
Source: company, Destimoney Research
Sep
-09
Dec-
09
Mar-
10
Jun
-10
Sep
-10
Dec-
10
Mar-
11
Jun
-11
Sep
-11
EXIM-Volume Share% Domestic-Volume Share%
While the Snowman segment is growing smartly
0
250
500
750
1,000
FY09 FY10 FY11 FY12E FY13E
0%
8%
16%
24%
32%…steady growth…
13
� GDL is planning to increase its capacity from present 18,000 pallets to 47,000 pallets by the end of FY13.
� As per industry data, by 2014 Cold storage market in India is expected to grow to `9 bn, while the reefer
transportation is expected to grow to `16 bn.
FY09 FY10 FY11 FY12E FY13E
Snowman Revenue-in Rs. mn (LHS) Operating Margins
Source: company, Destimoney Research
We expect the margin profile to remain stable despite tapering in toplinegrowth…
0%
20%
40%
60%
80%
…Consolidated revenue growth is expected to taper…
14
� We expect the growth to taper in FY13 due to higher base of FY12 and delay in stabilization of new
facilities.
� We expect the margins to remain stable or a tad lower than H1FY12 depending on the delay in deployment
of new capacities and movement in port volumes.
FY07 FY08 FY09 FY10 FY11 FY12E FY13E
Revenue Growth% Operating margin%
Source: Company, Destimoney Research
…therefore, we initiate coverage with ACCUMULATE rating and a target price of `̀̀̀136 per share
� Logistics sector being closely linked to GDP
growth; government’s and RBI’s focus on curbing
inflation at the cost of industrial growth (refer
Annexure II) coupled with deteriorating global
economic condition could start reflecting in
international trade with India in the medium term.
� We remain cautious on sudden fall in demand for
Relative Stock Performance (Dec'10=100)
70
100
130
160
Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11
finished product which could impact the
containerized cargo volumes in India.
� The stock is trading at 10.0 and 9.3 times its
FY12E and FY13E earnings.
� We initiate coverage on GATEWAY DISTRIPARKS
with a ACCUMULATE rating and a target price of
`̀̀̀136 per share.
Source: Company, Bloomberg, Destimoney Research
15
GDL NIFTY
FY10 FY11 FY12E FY13E
EPS (`) 7.3 8.9 12.4 13.3
CEPS (`) 11.6 13.8 17.6 19.0
P/E (x) 17.0 13.9 10.0 9.3
P/B (x) 2.0 2.0 1.8 1.6
ROE 12% 14% 18% 17%
ROCE 8% 9% 15% 14%
EV/EBIDTA (x) 10.4 8.1 5.4 5.2
Financial Summary
Balance SheetIncome Statement
( In ` mn)(In ` mn)(In ` mn)(In ` mn) FY10 FY11 FY12E FY13E
Net Sales 5,166 5,991 7,819 8,479
Operating expense 3,906 4,382 5,388 5,958
EBIDTA 1,260 1,609 2,431 2,520
Depreciation 455 502 572 620
EBIT 805 1,106 1,859 1,900
Interest 206 194 173 127
EBT 599 912 1,686 1,773
( In ` mn)( In ` mn)( In ` mn)( In ` mn) FY10 FY11 FY12E FY13E
Liabilities
Equity Share Capital 1,079 1,080 1,080 1,080
Reserves & Surplus 5,563 5,799 6,540 7,301
Loans 2,099 1,154 1,154 1,154
Deferred Tax Liability 187 140 140 140
Current Liabilities (CL) 1,019 672 860 933
Provisions 659 817 1,066 1,156
Minority Interest 625 3,568 3,568 3,568
Source: Company, Destimoney Research
16
Other Income 125 129 149 212
PBT 724 1,041 1,834 1,985
Tax (79) 44 495 547
PAT 803 997 1,339 1,438
Margins
Sales Growth % 14% 16% 31% 8%
Operating Margin % 24% 27% 31% 30%
Net Margin % 16% 17% 17% 17%
Minority Interest 625 3,568 3,568 3,568
Total 11,232 13,230 14,408 15,331
Assets
Gross Block + CWIP 10,553 12,036 12,714 13,787
Accumulated Depreciation 1,851 2,210 2,782 3,403
Fixed Assets 8,702 9,825 9,932 10,384
Investments 150 130 130 130
Misc 5 9 9 9
Current Assets (CA) 2,374 3,266 4,337 4,808
Total 11,232 13,230 14,408 15,331
Key Risks and Challenges
� Logistics industry is closely linked to economic growth, slowdown in economic activities and drop in EXIM
trade will impact the growth of GDL.
� Congestion at ports can impact the utilization of storage space (CFS/ICD) and rakes thereby reducing the
return on assets of the deployed asset resulting in lower growth and profitability.
� Transportation charges amounted for 48% of the revenue in FY11. Rise in fuel prices will directly impact the
profitability of the company.
� Unfavorable revision in haulage charge can lead to deterioration of viability of transportation by rail even
further.
� Protectionist trade policy by government (e.g. ban on transport of some key commodities on private rakes)
can throw the operations of private players off-road.
17
ANNEXURESANNEXURES
18
Annexure I: Typical port logistics
The subsystems of a typical container terminalDefinitions as per Ministry of Commerce
� CFS (Container Freight Stations) / ICD (Inland
Container Depots):
� A common user facility with public
authority status equipped with fixed
installations and offering services for
handling and temporary storage of
import/export laden and empty
19
Source: Henesey (2004)
Diameter of the subsystem indicates its capacity
import/export laden and empty
containers carried under customs
control and with Customs and other
agencies competent to clear goods for
home use, warehousing, temporary
admissions, re-export, temporary
storage for onward transit and outright
export. Transshipment of cargo can also
take place from such stations.
Annexure II: Moderation in IIP
IIP trend (2004-05base)
2.4
6.3
9.5
13.313.714.9
13.1
8.57.4
9.9
4.56.1
11.3
6.48.2 7.5 6.7
9.4
5.3 5.9
8.8
3.3 4.1
-5.1
0.0
5.5
11.0
16.5
20
-5.1(5.5)
Oct
-09
No
v-0
9
Dec-
09
Jan
-10
Feb
-10
Mar-
10
Ap
r-1
0
May-
10
Jun
-10
Jul-
10
Au
g-1
0
Sep
-10
Oct
-10
No
v-1
0
Dec-
10
Jan
-11
Feb
-11
Mar-
11
Ap
r-1
1
May-
11
Jun
-11
Jul-
11
Au
g-1
1
Sep
-11
Source: CSO
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