Strong volumes continue to drive growth… • Gateway Distriparks :: ICICI Securities, report

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Strong volumes continue to drive growth… • Gateway Distriparks reported spirited Q3FY15 revenue growth of 10% YoY to | 273.7 crore vs. | 248.2 crore in Q3FY14. Rail segment revenues recorded healthy growth of 19.5% YoY to | 163 crore while CFS posted strong growth ~26% YoY to | 88.6 crore • EBITDA in the quarter was at | 86.4 crore growing strongly by 35% YoY whereas QoQ it remained mostly flattish. On the margin front, EBITDA margin expanded ~582 bps YoY, 227 bps QoQ to 31.6% • PAT for the quarter stood at | 54.3 crore posting growth of ~61% YoY. On the volume front, CFS throughput for Q3FY15 stood at 96,612 TEUs with rail/ICD at 63,952 TEUs, posting growth of 16% and 24%, respectively, YoY CFS volume grows strong at Vizag, Kochi; Mumbai volumes return GDL with ~5,50,000 TEUs annual capacity is one of the largest container freight station (CFS) operators in India. Throughput of GDL’s CFS business grew at a modest CAGR of ~1% in FY11-13 to 342662 TEUs. However, with an improvement in the economy and maturity of new CFS such as Kochi and Vizag, we expect CFS volumes to post a CAGR of 16% over FY14-17E. For Q3FY15, CFS volume at Mumbai grew ~11% YoY to 56,016 TEUs whereas other CFS at Chennai and Kochi posted strong growth of 29% and 364% YoY to 23,114 and 3907 TEUs, respectively. Going ahead, we expect volume growth to sustain as major port’s container volume growth shows significant traction. Rail/ICD segment continue to grow strong catalysing growth for GDL GDL with nearly 785,000 TEUs capacity in ICD segment and 21 rakes in Gateway Rail Freight (GRFL) is the second largest container train operator (CTO) in the country. Rail/ICD throughput for GDL grew at a CAGR of ~7% over FY12-14 to 205538 TEUs. Going ahead, it is expected to grow at ~13% CAGR over FY14-17E. The rakes ply mainly on the Exim route, thereby reducing empty running and garnering higher margins. Operating margins initially declined (100 bps YoY to 15% in FY13) in the rail segment due to a hike in freight by Indian Railways. However, in FY14, GDL has been able to pass on those hikes (partially) and also enhanced its operational efficiency with double stacking and closure of unprofitable routes, enabling the rail/ICD segment to report a 500 bps YoY improvement in the EBITDA margin. For the quarter, the margin for the rail segment improved 18.8% to 31.1% YoY. Further, with the Faridabad ICD becoming operational and expected to gain critical mass in the next two quarters, throughput of the rail/ICD segment is expected to improve further. Going ahead, GDL is planning a capex of nearly | 75 crore in FY15 to develop another ICD near Ahmedabad, which is expected to be operational in 18-24 months. CFS volumes, higher rail segment margins continue to perk-up valuation As container volumes at major ports like JNPT and Chennai post growth of 10% and 6% YoY, respectively, in YTD, we expect the CFS segment to post robust growth. Further, as diesel prices ease together with double stacking and operationalisation of Faridabad ICD, we anticipate GDL rail/ICD segment will also report significant growth. Finally, as the associate cold chain segment continues to grow at a steady pace for GDL, we value it with 20% holding company discount together with SOTP for CFS and rail segment to arrive at a target price of | 485 with a BUY recommendation.

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http://content.icicidirect.com/mailimages/IDirect_GatewayDistriparks_Q3FY15.pdf