Gateway Distriparks surges 15% post Q3 results; analysts see more upside

Shares of Gateway Distriparks surged 15 per cent to Rs 135 on the BSE on Wednesday, amid heavy volumes, after the company’s consolidated net profit nearly doubled to Rs 32.62 crore for the December quarter (Q3FY21), led by strong operating performance. The company, a leading integrated inter-modal logistics facilitator, had posted a profit of Rs 16.39 crore in the year-ago quarter.

The stock is trading close to its 52-week high level of Rs 138 scaled on January 29, 2020. The trading volumes on the counter jumped over three-fold and a combined 1.9 million equity shares changed hands on the NSE and BSE till 11:06 am.

The company’s Ebitda (earnings before interest, taxes, depreciation, and amortization) margins improved 520 basis points (bps) to 26.9 per cent from 21.7 per cent in Q3FY20. Total revenue, meanwhile, grew 3.9 per cent to Rs 316 crore against Rs 304 crore in the corresponding quarter of previous fiscal.

The management said the revival in the EXIM trade has been much faster than anticipated. In Q3FY21, the company witnessed a sharp recovery in its overall volumes for both container freight station (CFS) and rail container business. The improvement in volumes has been seen sequentially every month since the beginning of October 2020. In the month of December 2020, the company recorded the highest ever monthly throughput of 25,676 TEUs in the rail container business. And in the same month, the CFS business also witnessed nearly peak levels with 30,085 TEU.

As per the management of Gateway Distriparks, the route between Palanpur (Gujarat) to Pipavav is expected to be operational by end of September or October 2021 (with electric traction), while the Mundra port connectivity is expected to lag Pipavav by few months.

With most lead industry indicators pointing to a strong demand revival, the management anticipates continuous month-on-month momentum in the growth of volumes for foreseeable future. A robust balance sheet combined with our strategically located infrastructure alongside the WDFC (Western Dedicated Freight Corridor) will help the company to capitalize on the future growth opportunities, it said.

Brokerage Take
Brokerage JM Financial sounds bullish on the company post the December quarter numbers and has a 'BUY' rating on the stock with a target price of Rs 220.

"Gateway Distriparks surprised positively in Q3FY21, led by sustained improvement in trade and improved profitability (rail business). The company's deleveraging process remains intact while the restructuring process announced in September 2020 to improve fungibility of cash flows and operational synergies is expected to be completed over next 8-10 months," it said in a note. 

HDFC Securities, too, has a BUY rating on the firm with a target price of Rs 165. "In September 2020, we upgraded Gateway Distriparks to BUY, given the company’s improving fundamentals. Following Q3 numbers, we raise our FY22/23 estimates by 6 per cent. We maintain BUY with a target price of Rs 165, at 9x FY23E EV/EBITDA for the rail business," the brokerage said.