>GATEWAY DISTRIPARKS (EDELWEISS)

CFS/ICD container volumes continue to feel the pressure
Growth in container volumes is a function of global trade. Therefore, in the absence of any uptick in the EXIM trade, Gateway Distriparks’ (GDL) container volumes are expected to be under pressure in H2FY09. Management expects volume decline in the fourth quarter to be steeper, to the tune of 20% Q-o-Q. For the full year, CFS volumes are expected to register a decline of ~7-10% Y-o-Y.

Increase in realisation due to higher ground rent likely to be reversed
In a declining volume scenario, realization for the company in the past few quarters has been increasing. The realization in Q3FY09 was at INR 8996/TEU, a growth of 22.7% Q-o-Q, on account of higher ground rent charged. This was due to unwillingness of importers to take container deliveries, which resulted in higher ground rent, translating into higher realisations for the company. We, however, continue to maintain that this kind of trend is unsustainable. Also, the company’s realisation is expected to come under pressure in the coming few quarters.

Capex plans to slow down due to uncertain environment
GDL is expected to go slow on its capex plan in the coming few quarters. 70% of the incremental capex is expected to be in the container train segment, while the remaining will be towards setting up of CFS/ICD. GDL currently owns 13 container rakes and is expected to take delivery of another rake in Q4FY09. Currently, the company is operating 10 rakes on the domestic sector and the remaining on the EXIM route. It is expected to set up three new ICDS at Kalamboli, Ludhiana and Faridabad by December 2009.

Focus on domestic container in railways to boost volumes
GDL continues to focus on domestic segment for container traffic growth in its container train business. The company expects that, with train operators increasing their services and providing last mile connectivity, there will be a shift in volumes from the traditional roadways to transportation of goods by railways which is ~30% cheaper vis-à-vis road transportation. The current market share for railways is ~35%, which is expected to be ~55% in the coming few years.

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