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Gateway Distriparks Ltd.

SKP Securities Ltd www.skpmoneywise.com Page 1 of 1

CMP Rs. 138 Target Rs. 192 Initiating Coverage- BuyKey Share Data

Face Value (Rs.) 10.0

Equity Capital (Rs. crs) 108.15

Market. Capitalization (Rs. crs) 1494.63

52-wk High / Low (Rs. ) 147.7 / 97

Average Yearly Volume 65809

BSE code 532622

NSE code GDL

Reuters code GATE.BO

Bloomberg code GDPL IN

Shareholding Pattern 30th June 2011

Financials (Consolidated) (Rs. Crore)

FY10 FY11 FY12E FY13E

Net Sales 516.6 599.1 711.3 854.1

Sales Gr 14% 16% 19% 20%

EBIDTA 124.9 159.7 214.0 257.6

PAT 80.3 99.7 123.5 154.9

PAT Gr 4% 24% 24% 25%

EPS (Rs.) 7.3 8.9 11.1 13.8

CEPS (Rs) 11.5 13.6 16.3 19.4

.

Key Financial Ratios


Div. yield 2.5% 4.3% 2.9% 2.9%P/E 18.8 15.4 12.4 10.0

P/BV 2.2 2.2 1.9 1.7

P/Cash EPS 11.9 10.1 8.5 7.1

MCap/Sales 2.9 2.5 2.1 1.8

EV/EBIDTA 12.9 9.1 6.5 5.2

ROCE 8% 9% 13% 15%

ROE 12% 10% 11% 13%

EBITDM(%) 24% 27% 30% 30%

NPM (%) 15% 16% 17% 17%

Debt-Equity 0.3 0.1 0.1 0.1

I year Performance comparison GDL v/s BSE Midcap

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

GDL BSEMIDCAP

Analyst: Kamna Jain

Tel No.: +91 22 2281 9012Email: [email protected]

Company ProfileGateway Distriparks Ltd (GDL), a leading provider of port related logisticssupport services in India. GDL operates container freight station on a pan

India basis with strategic locations at JNPT, Chennai, Vizag and Kochi andICDs located at Garhi Harsaru and Ludhiana, Kalamboli and Asoti, Faridabad.This presence enables it to cater to the West coast traffic, demand from theNorthern hinterlands as well as the east coast traffic.

Investment Rationale

Expansion of CFS facilities to capture burgeoning container traffic

GDL is one of the key player in CFS business with a total capacity of0.44 mn TEUs. GDL is focusing to enhance CFS business, given thatCFS division attracts higher margin.

It has expanded its capacity at Chennai and Vizag port to 90000 and48000 TEU respectively. Kochi port facility is expected to start itsoperation by Q4FY12, with this total CFS capacity would increase to0.54 mn TEU by FY13E from 0.44 mn TEUs in FY11.

We expect CFS volume to register 12.2% CAGR from 3,33,422TEUs in FY11 to 4,20,000 TEUs in FY13E with the new capacity

starting at Kochi. We expect CFS division to register a top line of

Rs. 274.0 crore and Rs. 327.5 crore in FY12E and FY13E

respectively.

Rail Business a key growth driver

GDL Ltd is now the largest private railway haulage operator in Indiaand operating 21 rakes and 3 ICDs at strategic locations. ICD atFaridabad is expected to be operational from Q3FY12E.

On the rail business, volume is expected to grow at a CAGR of16.5% over FY11-FY13E.We estimate GDLs Railway businesss

sales to grow at a 16% CAGR in FY11-FY13E.

Cold chain logistics business adjoining growth

Snowman Logistics Ltd (SLL) is the only organized pan India cold chalogistics player in this growing business, with a nationwide netwoconnecting more than 100 cities and more than 4400 outlets.

Company has a capacity of over 16000 pallets for frozen and chillproducts and fleet of over 100 refrigerated trucks. We expect pallcapacity to increase to 31000 in FY12E and 41000 by FY13E.

Valuation

At current market price of Rs. 138-, GDL is trading at P/E of 12.4x and

10.0x of FY12E and FY13E earnings of Rs. 11.1 and 13.8 respectively. We

recommend BUY rating on the stock with a target price of Rs. 192/- (40%

upside) in 15 months at the P/E of 14x on FY13E earnings.

N o n

P r o m o t e r

9 %

I n s t i tu i o n s

1 3 %

F o r e i g n

2 8 %

Pub l ic

1 0 %

P r o m o t e r

4 0 %

Source: Capitaline

October 7, 2011

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SKP Securities Ltd www.skpmoneywise.com Page2 of 11

Logistics Industry

The Indian logistics industry accounts for a mere 2% ($100 billion) of the $5000 billion globallogistics industry despite having the second largest network of roads at 3.83 million km, the fourthlargest rail network of 63000 km, 128 airports, 12 major ports, 1 trans-shipment port and 187 nonmajor ports.

Indian Logistics sector grew by 8 to 10 percent annually over the last decade. Several factors havefavorably impacted the growth of the logistics industry, like the countrys tax regime, growth acrossmajor industry segments such as automobile, pharmaceutical, fast moving consumer goods (FMCG)and the emergence of organized retail.

Economic survey for 2010-11 reflects that economy is an upswing mode, with a growth of 8.6% inFY10 and FY11 and is projected to grow at 8.75% - 9.25% in FY12. Strong economic growth andliberalization have led to considerable increase in domestic and international trade volumes over thepast few years. Consequently, the requirement for transportation, handling and warehousing isgrowing at a robust pace and is driving the demand for integrated logistics solutions.

Exim trade volume of India is growing consistently from last decade hence India is set to increaseits share in global trade from less than 1% now to about 1.6% in 2012.

Industry Overview

Source: Economic survey 2010-11

India's Exim Trade

0

200000

400000

600000

800000

1000000

1200000

1400000

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Apr-

Dec

Rs.crores

Export to GDP ratio

0%

10%

20%

30%

40%

50%

60%

70%

Thailand China South Africa Maxico India

Source: SKP research

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Indias level of containerization is less than 25% as against global average of 60-70%. Averagetime taken to clear import and export cargo at ports is about 19 days in India, against 3-4 days inSingapore. The trend towards containerization picked up in India in the last decade. Containertraffic has seen a 12% CAGR in India from 2.5 million TEU in 2000-01 to 7.5 million TEU in2010-11.

The incessant growth in containerized traffic provides significant indication of increase inmultimodal transport as containers are designed for door to door transportation by different modes.

CFS/ICDs

CFSs and ICDs are facilities set-up for the purpose of in-transit container handling, examinationassessment of cargo with respect to regulatory clearances, both import and export. The CFSs /ICDs are an integral part of the logistics chain in relation to the movement of containerized cargo.Functionally, there is no distinction between an ICD/CFS as both are transit facilities which offerservices for containerization of break-bulk cargo and vice-versa.

An ICD is located in the interiors (outside the towns) of the country away from the gateway ports.A CFS, on the other hand, is an off dock facility located near gateway ports which helps indecongesting the port by shifting cargo and customs related activities outside the port area.

Primary Functions of ICDs / CFSso Receipt and dispatch/delivery of cargo.o Stuffing and stripping of containers.o Transit operations by rail/road to and from gateway ports.o Customs clearance.o Consolidation and desegregation of cargo.o Temporary storage of cargo and containers.o Maintenance and repair of container units.

Indias freight transport system currently carries approx. 2.8 billion metric tones of cargo, whichis expected to grow to approx 5.2 billion MT by 2020 at a CAGR of 6 percent. Logistics cost in

India is fairly high at around 14% of GDP, as against 8-9% in most developed nation. This

inefficiency is reflected on all products being manufactured, consumed, warehoused and traded

in India, contributing significantly to the biggest challenge faced by Indias growing economy

Inflation. Measurable improvements have been made over the last few years in building hard

infrastructure, but still at the fundamental level, road has the largest share of transport at about

60% with rail having only about 35% market share. Thus dependency on road makes hinterland

cargo movement more expensive and inefficient.

Source: IPA & SKP Research

Container traffic (TEU'000)

0

2000

4000

6000

8000

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

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Gateway Distriparks Ltd (GDL),

Gateway Distriparks Ltd, a leading provider of port related logistics support services in India,promoted by the Windmill group, the Thakral group and Paramesware Holdings Ltd based inSingapore and Mr. Prem Kishan Gupta and Prism International Pvt Ltd, based in India.

GDL operates container freight station on a pan India basis with strategic locations at JNPT,Chennai, Vizag and Kochi.

GDLs subsidiary, Gateway Rail operates the Rail-linked facilities at Garhi-Harsaru (Gurgaon,Haryana), Ludhiana (Punjab) and Kalamboli (Navi Mumbai). Its upcoming terminal at Asaoti(Faridabad, Haryana) will be operational by Q4FY11-12. Gateway rail operates 21 trains and 235+road trailors at its rail linked terminals.

The service offering of the company includes transportation of containers to and from the port,stuffing and destuffing of cargo, custom clearance, storage in warehouse and other value added

services such as general and bonded warehousing services, palletizing, shrink wrapping and otheradministrative services.

GDL also provides Cold Chain Logistics Solutions via a pan-India network through its JV withMitsubishi and IFC (World Bank) Snowman Logistics Ltd. In March 2010, International FinanceCorporation has invested Rs. 248.90 million in the equity capital of the company. MitsubishiCorporation, Mitsubishi Logistics Corporation and Nichirei Logistics Group Inc. are othershareholders in SLL. The company is in the process of expanding its cold store capacities andrefrigerated transport network.

.

Location and facilities

Company Overview

Location CFS/ICDs Area(Acres) Title

Navi Mumbai - JNPT CFS 35 Leasehold

Punjab Conware - JNPT CFS 27 15 years O&M

Chennai CFS 20 Freehold

Vizag CFS 20 Leasehold

Kochi CFS 20 Freehold

Garhi Harsaru Rail ICD 90 Freehold

Ludhiana Rail ICD 50 Freehold

Kalamboli, Navi Mumbai Rail ICD 17 Alliance

Faridabad Rail ICD 66 Freehold

Source: Company & SKP Research

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Strategic location and enjoying fair market share

Gateway Distriparks Ltd has its presence in key ports of India like JNPT Mumbai, Chennai,

Vizag, Kochi where its CFS are enjoying fair market share. The CFS at Navi Mumbai is located ata distance of 9 kms from JNPT. JNPT has recorded a CAGR of 14% from 1.19 million TEUs in2000-01 to 4.27 million TEUs in 2010-11 in the volume of container throughput handled over thepast ten years. GDL is very well positioned to take advantage of this growth potential at JNPT.

The CFS at Chennai is situated at a distance of 16 kms from Chennai port, Indias second largestcontainer terminal port. GDL is enjoying 8% market share at this port. The ICD at Garhi is locatedat a distance of 40 kms west of Delhi and can also cater to the markets in Punjab, Rajasthan, UttarPradesh, Haryana and Delhi.

Thus, GDL with its pan India presence at Navi Mumbai, Chennai, Vizag, Kochi and Delhi and en-route access to western gateway ports of Kandla, Pipavav and Mundra can effectively address the

requirements of Import/ export container cargo from various strategic locations.

Expansion of CFS facilities to capture burgeoning container traffic

GDL is one of the key player in CFS business with a total capacity of 0.44 mn TEUs. GatewayDistriparks enjoys 13% market share at JNPT Mumbai, 8% market share at Chennai and

approx 40% market share at Vizag port.

GDL is focusing to enhance CFS business, given that CFS division attracts higher margin. It hasexpanded its capacity at Chennai and Vizag port to 90000 and 48000 TEU respectively. Kochi portfacility is expected to start its operation by Q4FY12, with this total CFS capacity would

increase to 0.54 mn TEU by FY13E from 0.44 mn TEUs in FY11.

JNPT contributes approx 70% of total GDLs CFS volume and it attracts higer realization as 85%of the total JNPT volume is cotributed by imports. JNPT is Indias largest container port accountingfor 60% of the total Indian container traffic movement.

We expect CFS volume to register 12.2% CAGR from 3,33,422 TEUs in FY11 to 4,20,000TEUs in FY13E with the new capacity starting at Kochi. We expect CFS division to register a

top line of Rs. 274.0 crore and Rs. 327.5 crore in FY12E and FY13E respectively.

Investment Arguments

Source: Company and SKP Research

303963

368900

420000

333422

-6.3%

10.6%13.9%

9.7%

0

100000

200000

300000

400000

500000


TEU

-20%

0%

20%

40%

60%

CFS volume Growth(%)

192.2

274.0

327.5

233.6

-21.3%

21.6% 19.5%

17.3%

100.0

200.0

300.0

400.0


(Rs.incro

re)

-40%

-20%

0%

20%

40%

60%

CFS Revenue Growth(%)

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Rail Business a key growth driver

GDL Ltd entered the container rail haulage sector in 2007, after the space was thrown open to theprivate participation. GDL Ltd is now the largest private railway haulage operator in India andoperating 21 rakes and three ICDs at strategic locations. ICD at Faridabad is expected to beoperational from Q3FY12E.

`` Strong growth potential -In FY08 total Indian freight transport system carried approx. 2.8 billion

MT of cargo, of which road transport has 60% and Rail has just 35% market share. Highdependence on road transport causes inefficiencies and higher cost, to curve this there is a hugeneed of improving Rails share in the Indian freight transport system.

We believe, railways will maintain their relative advantage over truckers given the price benefits.Further the construction of dedicated freight corridor (DFC) would provide boost to the playersoperating in the railway haulage business by adding additional capacity that they can utilize.

Strong future of rail logistics, reduction in additional fixed cost, better utilization of rakes, loweroperating expenses and new ICDs at Faridabad are likely to improve the topline and profitability

of Rail business. On the rail business, volume is expected to grow at a CAGR of 16.5% overFY11-FY13E.We estimate GDLs Railway businesss sales to grow at a 16% CAGR in

FY11-FY13E.

Cold chain logistics business adjoining growth

Cold Chain Logistics business offers a Rs. 1000 crore market opportunity in India, out of which15% comes through organized players. Snowman Logistics Ltd (SLL) is the only organized panIndia cold chain logistics player in this growing business, with a nationwide network connectingmore than 100 cities and more than 4400 outlets. GDL has already accounted 20-25% of theorganized market.

There is increasing demand for cold chain facilities due to increase in consumption of perishableproducts and entry of large retail chains, which require extensive network of cold chain stores andrefrigerated transport to manage their supply chain.

Source: Company and SKP Research

289.9

370.4

430.2

320.3

58.1%

15.6% 16.2%

10.5%

100.0

200.0

300.0

400.0

500.0


(Rs.

incrore)

0%

20%

40%

60%

Rail Revenue Growth(%)

112444

154978

178224

131337

69.1%

16.8%15.0%

18.0%

0

50000

100000

150000

200000


TEU

0%

20%

40%

60%

80%

Rail Volume Growth(%)

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SLL is expanding its cold storage network at key locations and the refrigerated transport fleetacross the country. SLL serves large FMCG companies and organized retail chains like Amul,Mother Dairy, Baskin Robbins, KFC, HUL, ITC, Parle Agro etc.

Company has a capacity of over 16000 pallets for frozen and chilled products and fleet of over100 refrigerated trucks. We expect pallet capacity to increase to 31000 in FY12E and 41000 byFY13E.

GDLs cold chain logistics segment is looking fairly optimistic on the back of elevated demand.This segment has reported Revenue of Rs. 45 crore in FY11 and we expect it to grow at a CAGRof 46% from FY11 to FY13E. We believe, this segment will contribute around 9% and 11.3%to companys total revenue in FY12E and FY13E respectively.

Key Concerns

Increased competition: Logistic industry in India is quite fragmented.There are many small andlarge players providing end to end logistics solution, making this market highly competitive.Significantly, large numbers of CFSs are coming up at Mumbai, Chennai and Kolkata coupledwith shipping lines setting up their own CFSs is a major threat. However, with the anticipatedincrease in volumes, growth momentum is expected to be sustained in the short to medium term.

Economic downturn: Container growth depends on the EXIM volume in a country. In 2008-09companies have already seen a global turmoil. Any further slowdown can affect GDLs utilization

and rates for its service offering.

Regulatory changes: GDLs major revenue comes from its CFSs facility at JNPT. The businesspotential of GDLs Navi Mumbai operations is directly related to the operations of JNPT. Thusany downturn or regulatory changes at JNPT could affect the companys performance in future.

Source: SKP Research

35

67

96

45

2%

29%

44%

48%

0

20

40

60

80

100

120


Revenue(Rs.cror

e)

0%

20%

40%

60%

Growth(%)

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Peer Valuation

We believe that GDL Ltd is the best positioned company in the logistics sector with its pan India presence ofCFSs and ICDs and early entry in Rail haulage business.

P/E (x) EV/EBITDA (x) P/BV (x)

Revenue

EBITDA

Margin (%) FY12E FY13E FY12E FY13E FY12E FY13E

GDL 599.1 27% 12.4 10.0 6.5 5.2 1.9 1.7

Concor 3828.1 31% 12.8 11.7 8.9 8.3 2.1 1.8

Allcargo 2863.3 10% 8.6 7.3 6.1 5.2 1.3 1.1

GDL Ltd is a strong player in logistics sector led by its continuing growth momentum of its CFS businesswith presence at strategic locations and aggressive entry into Rail Haulage and Cold chain logistics

business.

At current market price of Rs. 138-, GDL is trading at P/E of 12.4x and 10.0x of FY12E and FY13E

earnings of Rs. 11.1 and 13.8 respectively. We recommend BUY rating on the stock with a target

price of Rs. 192/- (40% upside) in 15 months at the P/E of 14x on FY13 earnings.

1 year forward P/E Band 1 year forward P/BV Band

Topline to grow at a CAGR of 19.4% over

FY11-13E

We expect consolidated revenue to grow

at a CAGR of 19.4% over FY11-FY13E

on back of growth in cold chain logistics

business, capacity addition at existing

CFS and commencement of new CFS and

ICD.

Valuations & Outlook

Financial Outlook


516.6

14%

599.1

16%

711.3

19%

854.1

20%

0.0

200.0

400.0

600.0

800.0

1000.0

Rs.

inCrs


0.00

50.00

100.00

150.00

200.00

250.00

Apr-06

Aug-06

Dec-06

Apr-07

Aug-07

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

Aug-11

1.0 X 1.5 X 2.0 X 2.5 X 3.0 X

0.00

50.00

100.00

150.00

200.00

250.00

300.00

Apr-

06

Sep-

06

Feb-

07

Jul-

07

Dec-

07

May-

08

Oct-

08

Mar-

09

Aug-

09

Jan-

10

Jun-

10

Nov-

10

Apr-

11

Sep-

11

10.0 X 15.0 X 20.0 X 25.0 X

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CFS business is expected to grow at a CAGR of 18.4% over FY11-FY13E led by operationalof new CFS at Kochi and better utilization of CFS at JNPT.

Rail business is expected to register a topline of Rs. 430.2 crore in FY13E with addition ofnew ICD at Faridabad and better volume.

Cold chain logistics division is expected to grow at a CAGR of 46% over FY11-FY13E led byincrease in pallets capacity.

Revenue Mix:

EBITDA to grow at a CAGR of 27% over FY11-

FY13E

We expect EBITDA margin to improve byapprox 350 bps from 24.2% to 30.2% over

FY11-FY13E, mainly due to combined growingcontribution of CFS and Cold chain logistics

business.

.

Net profit margin is expected to improve by130 bps from 16.2% to 17.4% over FY11-

FY13E.


0%

20%

40%

60%

80%

100%


CFS Rail Logistics Cold Chain Logistics

124.9

159.7

214.0257.6

24.226.7

30.2

30.1

0.0

50.0

100.0

150.0

200.0

250.0

300.0


Rs.

incrore

20.0

25.0

30.0

35.0

40.0

EBITDAma

rgin(%

EBITDA EBITDA Margin(%)

79.1 96.8

120.0

148.7

17.4

16.9

15.3

16.2

0.0

50.0

100.0

150.0

200.0


Rs.

incrore

5.0

10.0

15.0

20.0

PATmarg

in(%)

Net Profit PAT Margin (%)

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Consolidated Financials for FY March (Rs. in Crore)Income Statement Balance Sheet

Financial Year FY10 FY11 FY12E FY13E

Net Sales 516.6 599.1 711.3 854.1

Growth (%) 14.3% 16.0% 18.7% 20.1%

EBIDTA 124.9 159.7 214.0 257.6

Growth (%) -15.1% 27.8% 34.0% 20.4%

Depreciation 45.5 50.2 55.8 60.4

EBIT 79.4 109.5 158.2 197.2

Interest 19.5 18.2 11.4 10.1

Other Income 12.5 12.9 13.5 14.2

PBT 72.4 104.2 160.4 201.3

Tax -7.9 4.4 36.9 46.3

PAT 80.3 99.7 123.5 155.0

Growth (%) 3.7% 24.2% 23.8% 25.5%

Minority Interest 1.2 3.0 3.5 6.2Profit after minorityinterest 79.1 96.8 120.0 148.7

O/S shares 10.8 10.8 10.8 10.8

EPS (Rs.) 7.3 9.0 11.1 13.8

Ratios

Year End March FY10 FY11 FY12E FY1

Equity capital 107.9 108.0 108.0 10

CCPS 0.0 295.8 295.8 29

Reserves & Surplus 556.3 580.0 649.4 74Shareholder's Fund 664.2 688.0 757.4 85

Minority interest 62.5 61.0 64.5 7

Secured Loan 209.9 115.4 94.8 8Deferred taxliability 18.7 14.0 14.0 1

Sources of funds 955.3 1174.1 1226.5 132

Net Block 870.2 982.5 986.8 102

Intangible Assets 0.0 0.1 0.1

Investments 15.0 13.0 13.0 1Total CurrentAssets 200.3 288.5 357.3 43Current Liabilities& Provisions 130.7 110.5 131.2 15

Net Current Assets 69.6 178.0 226.2 28

Misc. Expenses 0.5 0.5 0.5

Uses of funds 955.3 1174.1 1226.5 132

Year End

March FY10 FY11 FY12E FY13E

Valuation Ratios (X)

Price Earning (P/E) 18.8 15.4 12.4 10.0

Price / Book Value 2.2 2.2 2.0 1.7

Price / Cash EPS 11.9 10.1 8.5 7.1

EV / EBIDTA 13.0 9.1 6.5 5.2

Market Cap / Sales 2.9 2.5 2.1 1.7

Earning Ratios

OPM 24.2% 26.7% 30.1% 30.2%

NPM 15.3% 16.2% 16.9% 17.4%

RoNW 11.9% 9.8% 11.4% 12.9%

RoCE 8.3% 9.3% 12.9% 14.9%

DPR 0.5 0.7 0.4 0.3Balance Sheet

Ratios

Debt-Equity 0.3 0.1 0.1 0.1

Current Ratio 1.5 2.6 2.7 2.8

Debtors Days 42.2 39.4 34.8 34.6

Creditors Days 64.2 69.3 53.2 53.0Interest CoverageRatio 4.1 6.0 13.9 19.6

Cash Flow statement

Year End March FY10 FY11 FY12E FY1

Profit before tax 72.4 104.2 160.4 20

Add: Depreciation, Int. &other expenses 67.2 68.8 66.3 6

Net changes in working

capital 39.6 -40.9 -4.3 -

Direct taxes paid -16.4 -23.0 -36.9 -4

Cash Flow fromOperating activities 162.8 109.1 185.5 21

Capital expenditure -92.4 -160.1 -60.0 -10Investment,Dividend,Interest & others 5.7 4.4 0.0

Change in minority interest -1.6 -4.5 0.0

Cash flow from investing

activities -88.3 -160.2 -60.0 -10

Cash Flow from

Financing activities -54.2 122.2 -82.5 -7

Cash Flow during the year 20.2 71.1 43.0 4

Opening Cash 59.3 79.5 150.6 19

Cash & cash equivalent 79.6 150.6 193.6 24

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The above analysis and data are based on last available prices and not official closing rates. SKP Research is also available on Bloomberg,

Thomson First Call & Investext Myiris, Moneycontrol, Ticker plant and ISI Securities

.

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Member: NSE BSE NSDL CDSL NCDEX* MCX* MCX-SX FPSB *Group EntitiesINB/INF: 230707532, BSE INB: 010707538, CDSL IN-DP-CDSL-132-2000, DPID: 021800, NSDL IN-DP-NSDL: 222-2001, DP ID: IN302646, ARN: 0006, NCDEX: 00715, MCX: 31705, MCX-SX: INE 260707532

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