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Gateway Distriparks: Hurt by slowdown - Views on News from Equitymaster
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Gateway Distriparks: Hurt by slowdown
Aug 19, 2009

Performance summary
  • Net sales decline by 17.4% YoY during 1QFY10 as slowing economic growth impacts volumes and overall performance.
  • Despite lower cost of operation, operating profits decline by 24.5% YoY. This is mainly on account of lower growth in net sales.
  • Fall in net profits is lower at 15.7% YoY on account of lower tax expenses.


Financial performance snapshot
(Rs m) 1QFY09 1QFY10 Change
Net sales 474 391 -17.4%
Expenditure 211 193 -8.7%
Operating profit (EBITDA) 263 198 -24.5%
EBITDA margin 55.4% 50.7%  
Other income 9 7 -26.3%
Interest - 2  
Depreciation 36 38 4.0%
Profit before tax/(loss) 236 165 -29.9%
Tax 30 (8) -127.2%
Profit after tax/(loss) 206 173 -15.7%
Net margin 43.4% 44.3%  
No of shares (m) 115.6 107.7  
Diluted EPS (Rs)*   8.4  
P/E (times)   11.1  
*trailing twelve month earnings

What has driven performance in 1QFY10?
  • Gateway Distriparks reported a 17.4% YoY decline in sales for the quarter ended June 2009 as the global economic slowdown impacted the company’s performance. Post 1HFY09, economic slowdown affected EXIM trade that led to lower exports and impacted overall volumes of the company. While the company has not declared volume numbers, we believe the factors witnessed in 4QFY09 dragged the overall performance of the company even in 1QFY10.

  • Even though the company was able to reduce cost of operations by 8.7% YoY during 1QFY10, it registered a 24.5% YoY decline in operating profits due to declining sales. This also resulted in 4.7% contraction in EBITDA margins.

  • The company reported 29.9% YoY fall in profit before tax on account of poor show at the operating level and higher depreciation and interest costs. The company has also reported lower other income that capped the growth in profitability. Despite all this, fall in net profits was lower at 15.7% YoY on account of lower tax expenses. The same was the result of tax holiday enjoyed by the company under the Income Tax Act in respect of the Container Freight Station activities. The company has fulfilled provisions of Section 80-IA (4) (i) of the Income Tax Act, 1961, and hence is eligible for tax holiday.

What to expect?
At the current price of Rs 93, the stock is trading at a price to earnings multiple of 11.1 times its trailing twelve month earnings. Policy makers have lined up huge investment plans on the infrastructural front to support domestic economic growth. Revival in the global economy would support the country’s exports. Restoration of trade and improvement in domestic economic activity would result in increase in demand for Container Fright Stations (CFS). With that the company plans to revive its CFS business plans. The company is also planning to gradually move to a hub and spoke model for its logistics requirement with six-laning of highways being planned. This will entail the need for more Container Freight Stations at strategic locations.

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