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Gateway Distriparks Equity Research

HomeCompanyGateway Distriparks Equity Research

Date of Research – 21 January 2016

Price – Rs. 309.15

About the Company

Gateway Distriparks Limited (“Gateway Distriparks” or the “Company”) is the logistics facilitator operating in 3 segments – Container Freight Stations (CFS), Inland Container Depots (ICD) , and Cold Chain Storage and Logistics.

Gateway Distriparks operates 2 container freight stations at Navi Mumbai, 2 at Chennai, 1 at Visakhapatanam and 1 at Kochi. These CFSs have a total capacity of over 600,000 TEUs (Twenty-Foot Equivalent Units) and offer transportation & storage, general and bonded warehousing, empty handling and several value added service.

Gateway Distriparks’s rail operations are handled by its subsidiary – Gateway Rail Freight Limited (GatewayRail). GatewayRail own and operates a fleet of 21 trains and 230+ road trailers. GatewayRail operates container train service from these ICDs/Dry Ports to the maritime ports at Nhava Sheva, Mundra and Pipavav, transporting import and export as well as domestic containers.

The third segment consists of cold chain logistics solutions through the subsidiary – Snowman Logistics Limited. Snowman is one of the largest integrated temperature controlled logistics service provider operating 23 temperature controlled warehouses capable of warehousing 58,543 pallets and 3,000 ambient pallets spread across 14 locations with an ability to service customers on a pan- India basis.

Key Financial Figures

Consolidated (Rs. Cr)
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 
Total Income from Operations 954.07 1,012.79 1,111.32 1,050.85  393.40 
Expenses 709.98 755.63 784.61 802.20  302.31  
Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit) 244.09 257.16 326.71 248.65  91.09  
Depreciation 69.86 80.14 88.93 80.49  26.51  
Finance Costs 16.38 27.90 24.01 18.42  5.31  
Other income 15.49 17.11 12.81 19.68  12.28  
PBT 173.35 166.23 226.59 169.42  71.54  
Tax 37.33 18.97 44.05 67.06  15.04  
PAT (before Minority Interest and share of Associates) 136.02 147.25 182.54 102.36  56.51  
Profit/ (loss) attributable to Minority Interest 9.33 11.42 3.68 1.02 
Share of profit / (loss) of Associates (8.91) (8.30)  (17.61) 
Consolidated Profit / (Loss) for the year 126.69 135.83 187.77 109.63  74.12  

Profitability Analysis

Consolidated (%)
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 
Operating Profit Margin Ratio 25.58 25.39 29.40 23.66  23.15 
Net Profit Margin Ratio 14.26 14.54 16.43 9.74  14.36 

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies.

Key Balance Sheet Figures

Sources of Funds / Liabilities (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 
Share Capital 108.28 108.50 108.61 108.73 108.73 
Share Capital (Other than Equity) 295.80 295.80 295.80 295.80 295.80
Reserves & Surplus 639.50 680.18 728.02 814.56 832.59 
Net worth (shareholders funds) 1,043.58 1,084.49 1,132.43 1,219.09 1,237.12 
Minority Interest 66.31 80.64 125.73 25.94 27.56 
Long term borrowings 103.66 195.26 222.24 137.03 193.61 
Current liabilities 114.90 136.62 225.48 153.52 146.46 
Other long term liabilities and provisions 6.08 6.42 6.34 8.73 7.85 
Deferred Tax Liabilities 13.98 8.76 3.98 14.96 12.80 
Total Liabilities 1,348.50 1,512.18 1,716.20 1,559.28 1,625.40 

 

Application of Funds / Assets (Rs. Cr)
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 
Fixed Assets 1,016.49 1,226.99 1,334.08 994.57 1,062.44 
Noncurrent Investments 144.29 149.22 
Current assets 261.91 217.79 285.89 290.61 322.35 
Long term advances and other noncurrent assets 70.11 67.41 96.23 98.14 91.39 
Total assets 1,348.50 1,512.18 1,716.20 1,559.28 1,625.40 

Efficiency Analysis

 
Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 
ROCE 20.64 17.94 17.37 23.64 17.05 
ROE / RONW 12.65 11.68 11.99 15.40 8.27 

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry.

Valuation Analysis

Consolidated
Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 
Total Income from Operations (Rs. Cr.) 954.07 1,012.79 1,111.32 1,050.85  393.40 
Growth (%) 15.86 6.15 9.73 5.44  (62.56) 
PAT (Rs. Cr.) 136.02 147.25 182.54 102.36  56.51  
Growth (%) 0.29 8.26 23.97 43.93  (44.80) 
Earnings Per Share – Basic (Rs. ) 11.69 12.51 17.27 10.08  6.84 
Earning Per Share – Diluted (Rs. ) 11.68 12.51 17.27 10.08  6.84 
Price to Earnings 10.70 13.37 19.57 27.77  35.48 

Dividend History

The Company has maintained a dividend yield of 0.32 % over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook. Gateway’s average current ratio over the last 5 financial years has been 1.93 times which indicates that the Company is comfortably placed to pay for its short term obligations.

Long term Debt to Equity Ratio

Companies operating with high long term debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations.

Gateway’s average long term debt to equity ratio over the last 5 financial years has been 0.13 times which indicates that the Company operates with negligible debt.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.

Gateway’s average interest coverage ratio over the last 5 financial years has been 13.05 times which indicates that the Company can meet its debt obligations without any difficulty.

Ownership pattern

In its latest stock exchange filing dated 31 March 2017, Gateway Distriparks reported a promoter holding of 25.06 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.

At the same time, institutional holding in the Company stood at 56.73 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.

 

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