Riding Strong Volumes

A strong recovery in volumes and return of pricing power have led to the outperformance of Gateway Distriparks (GDL) in its third-quarter results. Despite COVID-19-related disruptions in the first half of 2020-21, the company has witnessed a strong comeback with a sharp recovery in its overall volumes for both verticals - Container Freight Stations (CFS) and Rail Container (RC) business.

For the third quarter ending December 2020, it has registered the highest monthly throughput of 25,676 Twenty-foot Equivalent Unit (TEU) in RC business. Similarly, CFS witnessed a close-to-peak business with 30,085 TEUs.

“The company expects a boost in volumes with the 306km-long stretch between Rewari and Madar being inaugurated on Jan 21. The management expects rail throughput of 25,000 TEU a month versus the current 21,000 TEU,” says an analyst with HDFC Securities.

GDL, which is one of India’s leading integrated inter-modal logistics facilitators, has registered a massive 99 per cent Year-on-Year (Y-o-Y) growth in its profit after tax at Rs 32.62 crore during the third quarter of 2020-21. GDL’s revenue rose 5 per cent Yo-Y on the back of 9 per cent improvement in rail volumes. The margin improvement in Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) by 600 basis points, reflects benefits of pricing power in both business verticals.

“EBITDA per TEU in rail has the benefit of improved volumes, turnaround time, and discount on rail haulage charge. CFS EBITDA per TEU has the benefit of value-added services inside,” explains an analyst at Kotak Institutional Equities Research.

“We have revised EBITDA for the rail and CFS businesses by 5 per cent for 2023,” he adds. The company’s net debt as of December 31, 2020, stands at Rs 494 crore against Rs 681 crore on March 31, 2020. “GDL has been repaying its debt after the fundraising and, hence, the interest cost is down 33 per cent Y-o-Y,” explains an analyst at HDFC Securities. Its cold chain business has grown on the back of a recovery in market volumes and cost rationalisation. The business is planning to add 10,000 pellets and is in the process of developing a technology platform for integrating operations of its associate Snowman Logistics.

“It is creating a separate vertical for pharma where it already gets nearly 10 per cent of the revenues from active pharmaceutical ingredients, bulk drugs, and vaccines. The entity has suggested a potential revenue boost of Rs 2.5 crore a month from the vaccine-related cold-chain business,” says an analyst at Kotak Institutional Equities Research.

Logistics stocks have witnessed massive up moves in the anticipation of demand for vaccine distribution. Experts feel this bodes well for Snowman Logistics as the company has strong infrastructure capabilities for the transportation of vaccines.

GDL’s stock rose by 37 per cent Y-o-Y, indicating a good prospect for the long-term investors. Brokerages remain upbeat on the company.

himali@outlookindia.com