The Gateway Distriparks (GDL) stock hit a 52-week high on Tuesday, probably because of reports that the company is looking to sell 25 per cent stake in its subsidiary Gateway Rail Freight, in which it owns 95 per cent. The company has, however, clarified that that nothing concrete has materialised yet.
Should the money flow into the company through an issue of fresh shares, it can be used for GDL's expansion plans which envisage setting up more container depots. The profitability of the container railway business was rather poor in the March 2009 quarter though it improved significantly in the first quarter of 2009-10 with losses, on a sequential basis, coming down to Rs 3.7 crore from Rs 8.6 crore.
That was primarily because more rakes --around 15-- were operated. Also, lower turnaround time meant more trips were possible resulting in a sharp increase in volumes, thereby pushing up revenues by 29 per cent year-on-year.
Although realisations were lower by about 8 per cent, revenues for the business rose more than 100 per cent to Rs 70 crore.
Despite this, GDL's profit after tax (post minorities) fell 20.4 per cent to Rs 16.6 crore during the quarter, thanks to the relatively poor performance of the container freight service (CFS) business. Volumes fell 15 per cent year-on-year which resulted in a 14 per cent drop in revenues and, consequently, lower operating margins.
Indeed, GDL's profitability during the June quarter was weak with margins dented by 940 basis points to just over 21 per cent. With exports and imports expected to pick up as local and global economies recover, the railway container business should see better volumes. In the current year, GDL is expected to turn in revenues of close to Rs 650 crore, which would be around 40 per cent higher than the turnover in 2008-09.
Net profits, however, are estimated to grow at a far more subdued 7-8 per cent to around Rs 85 crore. At the current price of Rs 124, the stock trades at just under 16 times its estimated 2009-10 earnings and the near-term upsides appear to be priced in.
