Recommendation: Buy (again!!! J)
CMP = Rs 85 (at the time of this recommendation)
Price target: Rs 236
Key points:
- On a consolidated basis, the net sales of Gateway Distriparks Ltd grew by almost 99% yoy to Rs 96.2 crore particularly due to the continued strong volumes at the Jawaharlal Neheru Port Trust (JNPT) and a ramp-up of the rail business. It’s Q1FY2009 results of are quite positive, owing to a strong top line growth and lower than anticipated losses in the rail business during the quarter.
- The operating profit margin declined by 1,050 basis points yoy because of a change in the company's sales mix but improved by 230 basis points sequentially to 35.1%. The sequential improvement in the margin was achieved on the back of improved profitability of the rail and cold storage businesses. Better utilisation, increased efficiency and commencement of operations on the export-import routes improved the profitability of the rail business.
- The cold storage business too broke even at the net level in Q1FY2009. Consequently, the operating profit of GDL grew by 53% to Rs 33.7 crore in Q1FY2009. Both depreciation and interest charges rose considerably due to high capital expenditure incurred by the company to expand its container and rail businesses. Consequently, the net profit grew by 12% to Rs 21 crore in Q1FY2009.
- The company, in its board meeting, has also approved a proposal to buy back its shares from the open market through stock exchanges at a price not exceeding Rs 110 per share, payable in cash, for an aggregate amount not exceeding Rs 64 crore.
- At the current levels, the stock is trading at 9x FY2010E earnings.
- I maintain a very strong Buy recommendation on the stock with a price target of Rs 236 over next 6-7 months.
