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Kotak Institutions
Gateway Distriparks (Buy)
Target: ₹135
CMP: ₹93.50
The miss in Q2-FY21 was driven by weakness in volumes. Gateway Distriparks expects slow recovery in volumes to continue and aims to reach 90 per cent of pre-Covid level by March. Beyond the results, we note positive events in completion of rights issue and board approval of reverse merger.
GDL’s board has approved the reverse merger of the standalone entity into its subsidiary Gateway Rail Freight Ltd (GRFL) in order to drive operational synergies and cost efficiencies, improve cash flows and debt servicing ability of the new merged entity GRFL. This step is in line with GDL’s plans to unlock value and reduce debt.
GDL successfully raised ₹116 crore via rights issue and fund proceeds have been utilsed for prepayment of NCDs. This has resulted in lowering net debt to ₹509 crore at end-Q2-FY21, reduced net debt to EBITDA to 2.5X and limited repayment for FY2021 to a modest ₹7 crore.
Prospects for the next year look good as cold chain business would benefit from opportunity to store and distribute the Covid-19 vaccine and rail business would benefit from commissioning of DFC.
We retain BUY with an unchanged fair value of ₹135.
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