Gateway Distriparks (GDL) continued to impress with an industry leading rail container volume growth (16% YoY growth for Q4FY22; 34% YoY growth for FY22). GDL has been gaining significant market share in the NCR despite heightened competition quarter after quarter, without compromising on realisation or EBITDA/te. Even adjusting for Rs120mn of compensation received on land parcel sales adjacent to Garhi Harsaru, rail EBITDA/teu was ~Rs9,000 for the quarter; management expects the same to be maintained over FY23E. Market share of GDL in the NCR has crossed ~15% (up > 300bps YoY) despite significant competitive intensity (~ 15 ICDs in NCR). Market share in Ludhiana is maintained despite ~8 ICDs operating in the region. Management expects to pass on the cost impact on account of Indian Railways removing 5% rebate over haulage of loaded containers and 25% rebate over haulage of empty containers. We maintain BUY with a revised target price of Rs102/share (Rs 83/share earlier).
- GDL achieved EXIM volume increase of ~19% YoY in Q4FY22 while rail and port EXIM container volumes have increased by 2-5%. FY22 has also seen substantial market share gains for GDL - management highlighted that port volumes increased by 8-9%, NCR ICD volumes were up 15%, while Gateway NCR volumes grew 32%. Similarly, for Ludhiana, GDL ICD volumes have outpaced market growth. This is despite increasing competitive intensity in the Ludhiana region and already heightened competition in the NCR market. With two new rail terminals coming up in the NCR, management expects mid-teens volume growth in the rail container volumes as against industry growth rate of 10-11%.
- Management is confident of passing on the cost impact on account of removal of Indian Railway rebates. IR, effective 1st May'22, has removed the 5% discount on haulage of loaded containers and effective 1st Sep'22 has removed the 25% discount on haulage of empty customers. Despite significant market share gains in NCR market and management assessment of increasing competitive intensity in the Ludhiana market in FY23E, GDL seems confident of passing on the cost increases. From the commentary, its become clear that GDL is one of the key beneficiaries of assured transit time scheme started by IR with transit time of 36 hours to JNPT, 48 hours to Mundra and 52 hours to Pipavav from Garhi terminal. Management is confident that GDL will continue to see the benefit of having the lowest transit time performance from the NCR, and hence, doesn't see any need to engage in pricing competition with peers.
- Maintain BUY with a revised target price of Rs102/share. GDL initiated a cooperate structure reorganization during FY21 (reverse merger of parent - GDL into Gateway rail freight, the rail subsidiary and relisting of GRFL as GDL). Revised target price of Rs102/share corresponds to erstwhile GDL price of Rs 408 (based on the share swap ratio of the reverse merger). |
