Gateway Distriparks Ltd - The Smart Investor

Gateway Distriparks Ltd

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragege4Gateway Distriparks LtdRecommendation BUY Gateway to growth!CMPRs.140Target Price Rs. 178SectorStock DetailsLogisticsBSE Code 532662NSE CodeBloomberg CodeGDLGDPLINMarket Cap (Rs cr) 1485Free Float (%) 59.6052- wk HI/Lo (Rs) 159/118Avg. volume BSE(Quarterly)73,919Face Value (Rs) 10Dividend (FY 11) 30%Shares o/s (Crs) 10.8RelativePerformance1Mth 3Mth 1YrGateway 3.6% 1.8% 1.0%Sensex 1.2% 7.1% 8.2%160155150145140135130125120Shareholding Pattern 31 st Mar 12Promoters Holding 40.40%Institutional (Incl. FII) 44.78%Corporate Bodies 5.08%Public & others 9.74%Kavita Vempalli – Research Analyst (022 3926-8173)kavita.vempalli@nirmalbang.comAmrita Burde – Research Associate (022 3926-8223)amrita.burde@nirmalbang.comSunil Jain – VP Retail Head (022 3926-8196)sunil.jain@nirmalbang.comGateway Distriparks Ltd (GDL) is an integrated logistics player in the containermovement space. It operates in three segments viz Container Freight Stations(CFS), Container Rail Operator (CTO) and Cold Chain Logistics. The company’score business in CFS continues to remain a cash cow with EBIDTA margins of ~54%. CFS segment saw pressure on volumes in FY12 due to low traction at theJNPT port, however realizations have remained firm. With added capacitiescoming up at the Kochi port and expansion at the JNPT port, we expect CFSvolumes to grow by 2.8% in FY13E and by 2.4% in FY14E. The investments in theRail segment are getting paid off for GDL with its revenues growing by 40% inFY12 and its EBIDTA/TEU growing by a CAGR of 21% between FY10-12. Thecompany is planning to add 5-6 rakes in FY13E and also start new shorter routeswhich would see rise in volumes while we expect marginal growth in margins inFY13E. Lastly, GDL is increasing its capacity in the cold chain segment by almost2.5x of which we believe mostly would reflect in the FY13E revenues. GDL hasbecome a Logistics conglomerate by positioning itself as one of the largest CFSplayer and as the largest private Container Train Operator in India. Theirinvestment in the fast growing cold chain segment is also gaining momentum.GDL’s core business is high cash generating business with low consolidated debtof ~ Rs.104 crore as in FY12. ROE has improved from 14.3% in FY11 to 18.4% inFY12. At CMP, the stock is trading at an EV/EBIDTA and P/E of 4.8 and 10.2x itsFY13E earnings respectively and looks attractive. We recommend a BUY on thestock with a price target of Rs.178 which is 28% upside from current levels.Expansion across segments – GDL has added capacity of 50000 TEUs at theKochi port which has got partially operational in the Q4FY12 quarter. It isexpected to be fully operational by Sep 2012 once the warehouse is fullyconstructed. The company is also adding up capacity of additional 60000 TEUsat its JNPT operations which we believe should reflect in the FY14E revenues.We expect volumes in FY13E in the CFS segment to grow by 2.8% in FY13E andby 2.4% in FY14E.GDL is adding up 5-6 rakes in the current fiscal in the Rail segment. They are alsoadding up shorter Rail routes to avoid rakes going empty. We believe thisshould affect the margins in the short term, however would improve thevolumes and utilizations of the Rail segment significantly. We expect thevolumes in this segment to grow by 13.4% % in FY13E and by 9.2% in FY14E.GDL is expanding its capacity of pallets in the cold chain segment from 18000 inFY12 to 46000 in FY13E. Currently, this segment contributes ~ 7.5% of GDL’srevenues, 5.5% of EBIDTA and 2.5% of PAT (due to higher taxes). We expect thissegment to grow by 75% in revenues to reach Rs.107 crores in FY13E.Operational Efficiency across the segments – The EBIDTA/TEU of the CFS andRail segments have been growing a CAGR of 23% and 21% respectively overFY10-12. The EBIDTA margins in the cold chain segment have remained stable at~22% over the years. Consolidated margins of the company have grown by 309bps in FY12 to 30.4%.ConsolidatedNet Sales Growth EBITDAPAT Margin EPS PE EV/EBITDAMargin (%)(Rs cr) (%) (Rs cr)(Rs cr) (%) (Rs) (x) (x)FY12A 823.5 36.2% 250.4 30.4% 132.0 16.0% 12.18 11.5 5.8FY13E 947.7 15.1% 288.4 30.4% 149.0 15.7% 13.74 10.2 5.0FY14E 1068.7 12.8% 329.0 30.8% 168.4 15.8% 15.54 9.0 4.5Page | 1

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdCompany OverviewGateway Distriparks Limited is a logistics facilitator and operates in three verticals; namely – Container FreightStations (CFS), Inland Container Depots (ICD) with rail movement of containers to major maritime ports, andCold Chain logistics.The company’s CFSs offer transportation & storage, general and bonded warehousing, empty handling andseveral value added services. GDL operates container freight station on a pan India basis with strategiclocations at JNPT, Chennai, Vizag and Kochi. GDL also had acquired rights to manage and operate PunjabGovernment’s Container Freight Station in 2006 for 15 years at JNPT.GDL's rail operations are handled by its subsidiary, Gateway Rail Freight Limited (Gateway Rail) in which theBlackstone Group of USA has made a private equity investment through Blackstone GPV Capital Partners(Mauritius) V-H Ltd. Gateway Rail provides inter-modal logistics and operates its own Inland ContainerDepots/Dry Ports. In 2009, Blackstone invested Rs.300 crore in the rail subsidiary through cumulativeconvertible preference shares (CCPS) which helped the company to reduce its debts. Blackstone would hold a37.3% to 49.9% stake depending upon the achievement of certain performance parameters. These CCPScannot be redeemed and are compulsorily converted either by GDL or by Blackstone. GDL can exercise the calloption to buy the CCPS from Blackstone after 5 years or Blackstone will have a put option to sell the sharesafter 10 years from the time of investment.GDL’s cold storage business is run under the name of Snowman Logistics Ltd (SLL). GDL acquired 50.1 % inSnowman Frozen Foods Ltd to enter cold chain logistics business in JV with Mitsubishi in Nov 2006. Today, itruns through its JV with Mitsubishi, Nichirei Corporation of Japan and IFC (World Bank). In March 2010,International Finance Corporation invested Rs. 24.89 crs in the equity capital of the company. MitsubishiCorporation, Mitsubishi Logistics Corporation and Nichirei Logistics Group Inc. are other shareholders in SLL.Snowman has a pan-India presence that offers comprehensive warehousing, transportation and distributionservices. It has a fleet size of more than 100+ owned and leased reefer vehicles.GDL’s business verticalsSource: Company & Nirmal Bang ResearchPage | 2

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdRevenue Break up60%50%40%53%40%55%53% 55%38% 39% 38%30%20%10%8% 7% 8% 7%0%FY09 FY10 FY11 FY12CFS Rail SnowmanSource: Company & Nirmal Bang ResearchKey milestones1998 Completed phase I of development and commenced commercial operations atNavi Mumbai with container handling capacity at 48,000 TEUs/annum2001 Completed phase II expansion at Navi MumbaiContainer handling capacity increases to 1,20,000 TEUs/annumIDFC invested Rs.26 crores into GDL equity2003 Completed phase III expansion at Navi MumbaiContainer handling capacity increases to 1,80,000 TEUs/annum.2004 Acquisition of ICD at Garhi Harsaru, GurgaonJoint venture for CFS at VizagAcquisition of CFS at Chennai, construction of warehouse at CFS Navi Mumbaiincrease in capacity to 2,16,000 TEUs per annumTemasek (Singapore) acquires 10% equity stake in GDL2005 GDL got listed on the Stock Exchanges in India in March 2005GDR Issue of US$ 85 Million in Dec 20052006 First container train rolls out of GDL's rail ICD at Garhi Harsaru, Gurgaon throughthe tie-up with CONCOR in May 2006Gateway Rail Freight Ltd. formed and over 60 acres of land in Faridabad Districtwas acquired for 2nd rail ICDJV with Chakiat Agencies for subsidiary – Gateway Distriparks (Kerala) Pvt. Ltd. , tostart a CFS on 17 acres of land at CochinAcquisition of 50.1 % in Snowman Frozen Foods Ltd to enter cold chain logisticsbusiness in JV with Mitsubishi in Nov 20062007 GRFL signs concession agreement with Indian Railways to operate container trainsin Jan 2007GDL takes over Punjab Conware's CFS near JNPT, Navi Mumbai under 15 years'Operation & Management (O&M) Agreement in Feb 2007Gateway Rail commenced rail movement of containers through own rakes2008 Gateway Rail receives & deploys 8 container trains in the EXIM and domesticroutes2010 Rs.25 Crores Invested by IFC in Snowman Logistics Ltd. for a 20 % stake in March2010Rs.300 Crores invested by Blackstone in GRFL in August 2010GDKL won the bid to set up CFS opposite Vallarpadam, Kochi in Oct 2010Source: CompanyPage | 3

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdInvestment RationaleRail segment leading the showGDL started its Rail business in 2007 after the Indian government opened up the sector for privateparticipation. The company operates 21 owned and 3 leased rakes through its 3 ICD’s and has plans toincrease the capacity going forward. GDL is the second largest container rail operator in India only afterContainer Corporation of India (Concor). Its ICD’s are located at Garhi (Gurgaon), Ludhiana and Faridabad(Started operations in Feb’12, not yet rail linked. Should get rail linked in 2-3 months). These ICD’s areconnected well to Mundra, JNPT and Pipavav ports. In 2009, Blackstone invested Rs.3 bn in the rail subsidiarythrough cumulative convertible preference shares which helped the company to reduce its debts. Thecompany plans to add 5-6 rakes (owned or leased) in the current fiscal with a capex of Rs.150 crores or more.ICD CapacityICD Land (in acres) Capacity - TEU'sGarhi 90 120000Ludhiana 33 144000Faridabad (not yet operational) 66 90000-96000Source: CompanyDespite being a capital intensive business, GDL Rail has been able to breakeven in Q3FY11. As in FY12, Railsegment contributed almost 55% of the total sales of the company. Almost 87% of the rail business comesfrom the EXIM trade and GDL has almost doubled the revenues of the rail segment in the past two years toreach Rs.450 crores in FY12.Source: Company Data, Nirmal Bang ResearchRevenues from the rail segment look extrapolated in Q4FY12 because of the change in reporting pattern.Annual terminal charges which earlier used to get net off were shown separately during the Q4FY12 quarter.Page | 4

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdThis is just a pass through income which is not comparable. Margins of the Rail segment saw a dip in thecurrent quarter with the company starting two new networks Sanand in Gujarat and Jodhpur in Rajasthanconnecting with Mundra/Pipavav. This has helped the volumes and affected the margins since the new routeshave come at lower margins.44004200400038003600340032003875.40 3925.02 3757.81EBIDTA/TEU - Rail3866.784184.673494.623000Source: CompanyQ4FY11Data, NirmalQ1FY12Bang ResearchQ2FY12 Q3FY12 Q4FY12 Q1FY13 FY12 FY13E FY14EOver the years, Rail segment has become the driver of growth for GDL. It now contributes almost 55% inrevenues, 28.5% of EBIDTA and 17% of PAT for GDL. EBIDTA/TEU has shown improvement on the back ofgood operational efficiency. Contribution to PAT is lower comparatively due to higher depreciation costsinvolved. However, going forward, we feel this contribution should improve on the back of:Higher Utilization levels – GDL has plans to utilize its ICDs optimally and thus increase the services byexpanding the connectivity by introducing more routes. This would bring in more business by utilizingstorage services at ICD’s. Further, GDL also provides last mile connectivity for its customers throughits own fleet of trailers. Lastly, the company is investing in sidings of ICD’s to reduce the parkingcharges it pays to Indian railways.Higher Volumes due to inclusion of shorter routes – GDL has lately introduced new networks toavoid empty return running of rakes. These routes are Sanand in Gujarat and Jodhpur in Rajasthanconnecting with Mundra/Pipavav. Management believes this would be the trend going forward aswell. This move has affected the margins in Q4FY12 quarter; however, we believe in the long runoverall margins should improve on the back of higher utilizations and higher volumes.Rail Revenues and margins3951.283664.834107.84700600500400300200100018.5%17.0%449.55 15.9%509.69573.50FY12 FY13E FY14ERevenues EBIDTA margin %19%18%17%16%15%14%Source: Company Data, Nirmal Bang ResearchPage | 5

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdCFS continues to breed cashGDL is one of the largest CFS operators in India with a capacity to handle 4,90,000 TEU’s annually. Thissegment has grown steadily for the company and had contributed almost 66% of the EBIDTA in FY12. CFSbusiness continues to remain the cash cow of the company with very high margins of almost ~ 54%.Moreover, working capital requirement is also very low for this segment and debt portion very minimal.CFS Capacity DetailsCFS Land (in acres) Capacity - TEU'sMumbai-JNPT 62 300000Chennai 20 90000Vizag 20 50000Kochi 6.5 50000Source: Company data, Nirmal Bang SecuritiesVolumes of the CFS segment has taken a hit from the past 3 quarters and remained flat in FY12 on the back ofslower economy growth and secondly due to rupee depreciation affecting imports at the ports. Volumes wentdown at the JNPT CFS while they remained stable at the Chennai and Vizag ports mitigating higher impact onvolumes. However, realizations of the CFS segment grew almost 38% in FY12 on the back of higher dwell time.Consequently, due to better operational management, EBIDTA/TEU also has grown by 41% in FY12.GDL has commissioned its Kochi CFS in Q4FY12 and partial operations have started and complete operationswould begin once the warehouse is constructed by September 2012. In addition, the company is also addingup capacity at its JNPT port of 60,000 TEU’s in the latter half of FY13. Moreover, the company also hasadditional land of 22 acres in Kochi near the port which can be utilized for future expansion. We expect CFSvolumes to grow by 2.8% in FY13E and by 2.4% in FY14E.EBIDTA/TEU - CFS60005000400030002000100003271.12758.6 2975.63634.5 4156.5 3417.34875.34815.3 5224.1 4904.54347.64949.3 5248.25510.6Source: Company Data, Nirmal Bang ResearchPage | 6

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdRevenue/TEU - CFS120001000080008067.48817.4 9002.29795.39136.38300.29171.2 9629.7 10111.26000400020000Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 FY12 FY13E FY14ESource: Company Data, Nirmal Bang ResearchSnowman - Small but growing exponentiallyGDL acquired stake in Snowman Logistics Ltd in 2006 and today owns 53.12% ownership. The other investorsare Mitsubishi Corp & Nichirei Corp of Japan (25.92%) and IFC (19.99%). The company operates cold storesand a fleet of refrigerated trucks giving wholesome services of warehousing, distribution and transportation.Currently, the company has a pallet size of 18,280 across 20 locations and plans to expand them to 46,340 byFY13 at an investment of Rs.100 crores. Company’s major clientele include HUL, Amul, Baskin & Robbins,Ferrero Rocher, Mars Chocolates, Pizza Hut and KFC.The % of revenue contribution to the total revenues has been increasing over the last few quarters.25207.6%7.1% 7.2%Cold storage Revenues8.2% 7.3% 7.3% 8.3% 9.2% 9.4%10.0%8.0%156.0%105018.522.09.910.0 11.4 13.9 13.4 13.7 16.3Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY134.0%2.0%0.0%Revenues (Rs in Crs)% of totalSource: Company Data, Nirmal Bang ResearchSnowman contributed 7.5% to revenues, 5.5% to EBIDTA and 2.5% to PAT in FY12. PAT was comparativelylower due to higher taxes. We expect this segment to grow by 75% in revenues in FY13E on the back ofcapacity expansion and favourable environment for the growth of cold storage segment.Page | 7

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdIndustryGovernment spend to rise on port developmentThe government has proposed an investment of Rs 73,794 crore for development of various ports in the 12thFive Year Plan (2012-17) and has set a target of enhancing the capacity of major ports to 1,229.2 mn tonnesper annum (MTPA) by the end of Mar'17 from 689.8 MTPA at the end of Mar’12. Also, according to Centre forMonitoring Indian Economy (CMIE), cargo traffic at all ports in the country will witness a 5.4% growth in FY2012-13. This is expected to be contributed by jump in crude oil imports and coal traffic.With such efforts taken on developing the ports to discard infrastructure bottlenecks, the container handlingcapacity at the major ports will increase and will be able to cater to the increasing traffic. This is positive forplayers with high exposure in the containerization business and the CFS operators are very certain thatbusiness will remain bullish for the next ten years if better facilities are to be made viable.JNPT is in the process of almost doubling its capacity to reduce the congestion at its port. JNPT is likely toinvite fresh bids after a consortium led by Port of Singapore Authority and ABG Infra failed to sign the dealalmost a year since the bids were opened for construction of the 4 th terminal. JNPT currently has a capacity of4.1mn TEUs and CT-4 would add up another 4.8 mn TEUs. A 5 th terminal is also being designed post which thetotal capacity of the JNPT port should shoot up to 10 mn TEUs.As per National Association of Container Freight Stations, the combined container traffic from Chennai,Ennore and L&T's Katupalli ports will increase by about 4 times, to around 8 million TEUs from the present 1.6million TEUs in the next five years.Certain development projects at Vizag Port are also in the anvil for enhancing the capacity to 110 milliontonnes by 2014-15.Scope for Containerized EXIM to growThe major ports together handle 70% of India’s external trade by volume shipped by sea. The containerisationbusiness in India is at a growth stage and accounts for 65% of total cargo being shipped through containers,unlike the international rate of nearly 75-80%. This is expected to grow in the coming years with ongoingexpansion works like development of new ports and the dedicated freight corridor.Figures in Mn TEUs FY07 FY08 FY09 FY10 FY11 FY12Container traffic at major ports 5.4 6.6 5.1 5.0 7.5 7.8Source: IPAAccording to reports, various plans are in place to increase the capacity of major ports from 670.13 milliontonnes in 2010-11 to 1,459.53 million tonnes by 2019-20. Similarly, there are plans to increase the capacity ofnon-major ports from 390 million tonnes in 2010-11 to 1,670.513 million tonnes in 2019-20. EXIM containerthroughput is expected to almost double in 6 years from 1,14,040 Mn MT in FY11 to 2,25,095 mn MT in FY17.Indian Ports Association has forecasted the India’s EXIM volumes at major Indian ports to grow at 6.5% CAGRduring FY08‐26E and containerized cargo handling at major ports to grow at 12% CAGR during the sameperiod. Such growth in containerization will propel the demand for ICDs and CFSs.Page | 8

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdGovernment initiatives to boost ExportsThe government recently unveiled a seven-point strategy to boost India's merchandise exports that have beenimpacted by sluggish demand from Europe and US. This includes interest subsidy scheme on labour intensiveexports by a year to March 2013, declared 7 countries as focus areas, offered special sops for export units inNorth-East and made ecommerce and courier exports out of Delhi and Mumbai eligible for the exportbenefits. The foreign trade policy 2009-14 has set a target of $446 billion exports by 2014 from $303billion atthe end of 2012. This is a positive trigger for the logistics sector where the growth of the sector has a positivecorrelation with EXIM trade.5004003002001000Exports in US $ bn446366303.72501822009-10 2010-11 2011-12 2012-13 E 2013-14 ESource: Ministry of Commerce100%80%Exports and Non-Oil Import Growth (YoY)60%40%20%0%-20%-40%ExportsNon-Oil importSource: Ministry of commerceCold storage logistics players see huge potential aheadCold chains total market in India was estimated to be ~ Rs 100bn in 2008. The market is estimated to reach ~Rs 325bn in 2015. The industry is expected to grow at 20-25 % CAGR over the next few years.India, at present does not have a comprehensive cold chain network and hence has been witnessing 30-35%wastage of perishable produce every year. This wastage is largely due to the absence of appropriateinfrastructure, both static and mobile, In India; currently the cold chain market is highly fragmented withmore than 3,500 companies in the whole value system. With the growing need of transportation of perishableproducts, there lies a huge potential in this segment.Source: TechnopakPage | 9

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdFinancial PerformanceQ1FY13 Results at a glanceQ1FY13 Q4 FY12 Q-o-Q Q1FY12 Y-o-YIncomeGDL & CFS Subsidiaries (CFS business) 78.12 71.06 9.9% 81.04 (3.6%)Gateway Rail Freight Limited (Rail business) 115.7 105.0 10.1% 89.6 29.2%Snowman Logistics Limited (Cold chain business) 22.0 18.9 16.5% 13.4 64.4%Total 215.8 195.0 10.7% 184.0 17.3%EBITDA 66.79 64.36 3.8% 62.73 6.5%EBITDA Margins % (total) 29% 33% (432)bps 34% (540)bpsGDL & CFS Subsidiaries (CFS business) 52% 54% (130)bps 55% (291)bpsGateway Rail Freight Limited (Rail business) 19% 22% (388)bps 17% 141 bpsSnowman Logistics Limited (Cold chain business) 24% 19% 545 bps 23% 119 bpsProfit Before Tax 49.77 43.30 14.9% 48.49 2.6%GDL & CFS Subsidiaries (CFS business) 37.44 33.45 11.9% 41.58 (10.0%)Margins% 49% 48% 125 bps 52% (309)bpsGateway Rail Freight Limited (Rail business) 8.7 7.7 13.0% 4.7 86.9%Margins% 8% 7% 14 bps 5% 238 bpsSnowman Logistics Limited (Cold Chain business) 3.6 2.1 69.2% 2.3 60.9%Margins% 16% 12% 458 bps 17% (35)bpsTax 14.57 11.28 29.2% 15.12 (3.6%)Tax Rate % 29% 26% 322 bps 31% (191)bpsNet Profit after Tax 35.20 32.02 9.9% 33.37 5.5%GDL & CFS Subsidiaries (CFS business) 25.41 23.87 6.5% 28.05 (9.4%)Margins% 33% 34% (81)bps 35% (189)bpsGateway Rail Freight Limited (Rail business) 8.5 7.5 13.8% 4.6 86.8%Margins% 7% 7% 19 bps 5% 232 bpsSnowman Logistics Limited (Cold Chain business) 1.29 0.68 89.7% 0.77 67.5%Margins% 6% 4% 209 bps 6% 11 bpsEPS (Rs.) 3.25 2.95 9.9% 3.08 5.5%Source: Company data, Nirmal Bang ResearchQ1FY13 Result AnalysisConsolidated results:Revenues were up 27% YoY and 19% QoQ on the back of strong traction from the Rail and ICD volumes.CFS volumes grew 2% YoY and 20% QoQ, however realizations de-grew by 6% YoY due to sharp fall indwell time across the ports leading to decline in CFS revenues by 4.3% YoY.Rail segment volumes grew by 56% YoY and 10% QoQ on the back of increased number of Rail routes andhigher ICD traction. Though realizations were down by 18% YoY, Rail revenues grew by 28% YoY.Cold Chain segment grew 64% YoY on the back of increase in capacities.Going forward, we can expect higher volumes in the CFS and Rail segments with Kochi CFS contributingmore and Faridabad ICD going operational post approvals.Page | 10

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdRisks to RecommendationDependence of economic growth: Logistics industry is closely linked to the country’s economicgrowth and any slowdown in economic activities or decline in EXIM trade will impact the growth ofGDL.Absence of proper infrastructure: Growth of GDL can be hampered by a lack of good quality ofinfrastructure of roads, railways or ports.Revision in haulage charges: Any adverse revision in haulage charge can impact the viability oftransportation by rail.Increase in Fuel Cost: Any further surge in fuel costs will impact the business even more as theoperational expenses would go up.44% of the Promoters shares are pledged.Peer comparisonSales EBITDA ROE ROCE EV/EBIDTA EV/SalesPEFY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14EGateway Distriparks 879.2 991.6 281.0 320.5 18.3% 19.0% 15.3% 16.6% 5.1 4.5 1.6 1.5 10.4 9.2ConCor 4516.4 4939.3 1113.6 1212.0 15.6% 14.8% 14.7% 14.0% 7.8 6.8 1.9 1.7 12.2 11.7Allcargo 3589.9 3886.1 429.1 492.3 13.9% 14.5% 10.8% 12.0% 4.8 3.8 0.6 0.5 7.6 6.3Transport Corp 2001.8 2185.2 160.7 185.1 16.2% 17.1% 15.9% 16.5% 4.9 4.35 0.35 0.35 7.2 6.2Source: NB ResearchPage | 11

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdValuation and RecommendationGDL has become a Logistics conglomerate by positioning itself as one of the largest CFS player and as thelargest private Container Train Operator in India. Their investment in the fast growing cold chain segment isalso gaining momentum. At CMP, the stock is trading at an EV/EBIDTA and P/E of 4.4 and 10.2x its FY13Eearnings respectively and looks attractive. We recommend a BUY on the stock with a price target of Rs.178which is 28% upside from current levels.PE BandPage | 12

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeFGateway Distriparks LtdFinancial PerformanceProfitability (Rs. In Cr) FY11A FY12A FY13E FY14E Financial Health (Rs. In Cr) FY11A FY12A FY13E FY14ERevenues 604.5 823.5 947.7 1068.7 Share Capital 108.0 108.3 108.3 108.3% change 15.0% 36.2% 15.1% 12.8% Reserves & Surplus 579.9 639.5 748.4 769.2Total Shareholders Funds 687.9 747.8 856.6 877.4EBITDA 165.1 250.4 288.4 329.0 Minority Interest 61.0 66.3 72.7 80.0EBITDA growth (%) 20.2% 51.6% 15.2% 14.1% Comp Conv Pref Shares 295.8 295.8 295.8 295.8Non-Current LiabilitiesDepn & Amort 50.2 62.8 69.5 76.2 Long term Borrowings 114.1 103.7 134.8 148.2Operating income 114.9 187.6 219.0 252.8 Deferred Tax Liabilites (net) 14.0 14.0 14.0 14.0Interest 18.7 13.5 13.5 14.8 Long term Provisions 3.7 4.7 5.4 6.3Other Income 7.4 12.4 7.4 6.2 Total Non- Current Liabilites 131.9 122.4 154.2 168.5PBT 104.1 186.4 212.8 244.1 Current LiabiltiesTax 4.4 50.8 57.5 68.3 Trade Payables 26.3 23.1 23.5 24.7PAT 99.7 135.6 155.3 175.8 Other Current Liabilites 42.0 52.1 62.5 68.7Minority interest 3.0 3.6 6.4 7.3 Short term Provisions 39.6 41.0 49.3 59.1PAT after M.I 96.8 132.0 149.0 168.4 Total Current Liabilites 107.9 116.2 135.3 152.5No of Shares 10.8 10.8 10.8 10.8 Total Equity & Liabilities 1284.5 1348.5 1514.6 1574.3EPS 8.93 12.18 13.74 15.54 AssetsCash per share 12.72 15.35 18.51 17.57 Fixed Assets 940.1 986.1 1086.1 1136.1Quarterly (Rs. In Cr) Sep.11 Dec.11 Mar.12 June.12 Goodwill on Consolidation 31.0 31.0 31.0 31.0Revenue 188.8 195.2 195.0 232.8 Total Non Current Assets 1035.9 1081.0 1183.7 1239.5EBITDA 61.2 62.2 64.4 66.8 Current AssetsDep & Amortisation 1.8 1.8 1.8 1.2 Trade Receivables 62.4 66.4 92.1 103.9Op Income 59.4 60.4 62.6 65.6 Cash Balances 137.7 166.2 200.4 190.2Interest 3.3 3.2 3.4 3.7 Short Term Loans & Advances 31.4 27.0 29.7 31.1Other Inc. 0.0 3.1 2.4 2.6 Total Current Assets 248.6 267.5 330.9 334.8PBT 47.4 47.3 43.3 49.8 Total Assets 1284.5 1348.5 1514.6 1574.3Tax 13.9 14.2 11.3 14.6 Cash Flow (Rs. In Cr) FY11A FY12A FY13E FY14EPAT 33.5 33.1 32.0 35.2 OperatingEPS (Rs.) 3.1 3.1 3.0 3.2 OP before WC 165.1 250.4 288.4 329.0Performance Ratio FY11A FY12A FY13E FY14E Change in WC (48.6) 1.4 (12.9) (2.6)EBITDA margin (%) 27.3% 30.4% 30.4% 30.8% (-) Tax (4.4) (50.8) (57.5) (68.3)PAT margin (%) 16.0% 16.0% 15.7% 15.8% CF from Operation 112.1 201.0 218.0 258.0ROE (%) 14.3% 18.4% 18.6% 19.4% InvestmentROCE (%) 9.6% 14.8% 14.9% 16.4% Capex (100.9) (272.8) (153.0) (185.0)Per Share Data FY11A FY12A FY13E FY14E Other Investment 2.0 13.0 0.0 0.0Reported EPS 8.9 12.2 13.7 15.5 Other Income 7.4 12.4 7.4 6.2BV per share 63.5 69.1 79.1 81.0 Total Investment (91.5) (247.5) (145.6) (178.8)Dividend per share 6.0 6.0 6.9 7.8 FinancingValuation Ratio FY11A FY12A FY13E FY14E Change in equity capital 0.09 0.28 0.00 0.00Price Earnings (x) 15.7 11.5 10.2 9.0 Dividend Paid (incl Tax) (75.6) (75.5) (86.5) (97.9)Price / Book Value (x) 2.2 2.0 1.8 1.7 Interest Paid (18.7) (13.5) (13.5) (14.8)EV / Sales 2.5 1.8 1.5 1.4 Loans & Others 131.8 163.7 61.8 23.3EV / EBITDA 9.0 5.8 5.0 4.5 Total Financing 37.6 75.0 (38.2) (89.4)Source: Company data, Nirmal Bang SecuritiesNet Chg. in Cash 58.2 28.5 34.2 (10.2)Cash at beginning 79.5 137.7 166.2 200.4Cash at end 137.7 166.2 200.4 190.2Page | 13

Initiating CoverageINITIATING COVERAGE – 13th September 2012tiating Coverageting Coverageg CoverageCoverageverageragegeGateway Distriparks LtdNotesDisclaimer:This Document has been prepared by Nirmal Bang Research (A Division of Nirmal Bang Securities Pvt Ltd). The information, analysis andestimates contained herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. Thisdocument is meant for the use of the intended recipient only. This document, at best, represents Nirmal Bang Research opinion and is meant forgeneral information only. Nirmal Bang Research, its directors, officers or employees shall not in any way be responsible for the contents statedherein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. Thisdocument is not to be considered as an offer to sell or a solicitation to buy any securities. Nirmal Bang Research, its affiliates and their employeesmay from time to time hold positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from orperform investment banking or other services for any company mentioned in this document.Nirmal Bang Research (Division of Nirmal Bang Securities Pvt Ltd)B-2, 301/302, Marathon Innova,Opp. Peninsula Corporate ParkOff. Ganpatrao Kadam MargLower Parel (W), Mumbai-400013Board No. : 91 22 3926 8000/8001Fax. : 022 3926 8010Page | 14