>GATEWAY DISTRIPARKS LTD. (SBICAP SECURITIES)

REASONABLE PERFORMANCE AMIDST UNCERTAIN ENVIRONMENT

GDL reported its 4QFY09 net profit at Rs 125.5 mn (- 21% YoY) below our expectations. Revenues grew at a modest pace of 53% YoY to Rs 1230 mn led by 70% YoY growth in volumes in rail operations and strong realisations of Rs 7600 per TEU as against Rs 6000 per TEU in Q4FY08 in CFS business. Volumes have fallen for the CFS business from 87,977 TEUs in Q4FY08 to 70,004 TEUs (-20% YoY) in the current quarter but strong realisations per TEU have led to revenues from the CFS business increase marginally by 2% YoY. Nascent Rail business continues to be in red which we believe would break even by FY11E. But overall a good performance by the company. We reiterate BUY

Brief highlights for the quarter

■ Revenues grew by 54% YoY in 4QFY09 to Rs 1231 mn mainly led by strong realisations of Rs 7600 per TEU across in CFS business as well as the ramp up in the rail business.

■ Operating margins fell sharply by 200 bps to 28% YoY led by diversification into low margin rail operations.

■ Interest costs and depreciation charges jumped sharply as GDL raised debt for the business (for acquiring rakes) and land acquisition for the new ICD’s during the preceding quarter.

■ The tax rate for the quarter was at 21 % as the company had 80IA benefits for its investments in ICDs and CFSs.

■ As a result, net profit after minority interest fall by 21% YoY to Rs 233 mn in 4QFY09.

SEGMENTAL SNAPSHOT

CFS business – subdued volumes but high realisations
With GDP and EXIM trade growth slowing, volumes handled at various ports by Gateway’s CFS business have also witnessed significant drop at 70,004 TEUs for the quarter dropping by 10% QoQ (77441 TEUs in Q3FY09). The realizations also dropped significantly to Rs 7595/TEU
as against Rs 8993/TEU in Q3FY09 (but grew YoY from Rs 5932/TEU in Q4FY08). The realization per TEU is as per our expectation. We believe it is primarily on account of much higher ground rent earned on account of stacking of containers at the ports and secondly on account of rationalization of rates by the CFS operators .

Container train business – increase in losses due to lower capacity utilization
As expected, Gateway's container train business losses have increased as compared to previous quarter. The volumes handled by the train business at 19,868 TEUs grew by 23% on a sequential basis. Realizations improved at Rs 31,256/TEU and EBITDA margins registered drop of 600 bps YoY. For FY09, losses in the container train business increased to Rs 248 mn as against loss of Rs 82 million during FY08. We believe the company today operates 15 rakes (13 owned and 2 leased) which we expect they would ramp up to 30 rakes by end of FY11.

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