GATEWAY DISTRIPARKS. Higher throughput offsets lower realisation. Mumbai CFS reports throughput of 65,384 TEUs, up 28.4% QoQ

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1 India Midcaps RESULT UPDATE GATEWAY DISTRIPARKS Higher throughput offsets lower realisation India Equity Research Logistics Gateway Distriparks (GDL) Q1FY13 standalone revenues were higher than our expectations due to higher throughput of 65,384 TEUs against the anticipated 53,000 TEUs. Higher throughput offset 11% QoQ dip in average realization to INR8,310/TEU due to aggressive pricing by the company (competition). On the consolidated front, the rail business continued its robust growth phase and reported 56% YoY increase in throughput (61,008 TEUs) leading to a PAT of INR85mn (+87% YoY). Even Snowman Logistics bounced back from a weak performance in Q4FY12 to report a PAT of INR13mn. Maintain BUY with target price of INR193. Mumbai CFS reports throughput of 65,384 TEUs, up 28.4% QoQ Revenue from Mumbai CFS at INR558mn was higher than the estimated INR487mn due to higher throughput of 65,384 TEUs (average for last two quarters was 50,800 TEUs). The average realization for the Mumbai CFS was lower at INR8,310 TEU (the lowest in last six quarters) due to aggresive pricing adopted by the company to gain market share. EBITDA margins were higher than our estimates at 51.5% due to lower variable costs at INR3,915/TEU (INR4,385/TEU during FY12). GDPL s standalone tax rate at 32.7% was higher than expectations (31.0%). Consequently, PAT for the standalone entity came in higher at INR179.3mn (estimated at INR149.3mn). GRFL throughput up 56% YoY; Snowman reports PAT of INR13mn Gateway Rail Freight (GRFL) reported a throughput of 61,008 TEUs, up 56% YoY. EBITDA margins at 16.1% improved 260bps QoQ mainly due to lower realizations (shorter routes) though it dipped on an absolute basis to INR3,508/TEU (INR4,001 in Q4FY12). There is further delay in the start of rail operations at Faridabad ICD (September 2012 earlier). Snowman Logistics reported a PAT of INR13mn after disappointing Q4FY12 numbers (PAT of INR7mn). Outlook and valuations: Positive; maintain BUY We continue to like GDL due to its volume growth story. GRFL sustained the momentum with a stupendous increase in volumes and PAT. We maintain our view that start of rail operations from the Faridabad ICD will be a key trigger for the stock. Maintain BUY recommendation on the stock. At CMP of INR136, GDL is trading at FY13E and FY14E P/E of 9.8x and 9.5x, respectively. Financials* Year to March Q1FY13 Q1FY12 Growth % Q4FY12 Growth % FY12 FY13E FY14E Net revenue (INR mn) (9.6) ,173 9,658 11,916 EBITDAX (INR mn) (19.4) ,443 2,829 3,299 Net profit (INR mn) (19.5) ,320 1,494 1,550 EPS - Diluted (INR) (19.9) Diluted P/E (x) (7.9) EV/EBITDA (x) ROAE (%) *Quarterly numbers are standalone, whereas yearly numbers are consolidated Edelweiss Research is also available on Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. EDELWEISS RATINGS Absolute Rating Investment Characteristics BUY Growth MARKET DATA (R: GATE.BO, B: GDPL IN) CMP : INR 136 Target Price : INR week range (INR) : 160 / 118 Share in issue (mn) : M cap (INR bn/usd mn) : 15 / 264 Avg. Daily Vol. BSE/NSE ( 000) : SHARE HOLDING PATTERN (%) Current Q4FY12 Q3FY12 Promoters % MF's, FI's & BKs FII's others * Promoters pledged shares (% of share in issue) PRICE PERFORMANCE (%) BSE Midcap Index Stock Edelweiss Securities Limited : 7.4 Stock over Index 1 month (1.8) (5.4) (3.6) 3 months 3.7 (7.4) (11.2) 12 months (4.7) Niraj Mansingka, CFA niraj.mansingka@edelcap.com Kunal Gupta kunal.gupta@edelcap.com August 16, 2012

2 Logistics Other Highlights CFS business Dwell time for Q1FY12 was days (10 days during Q4FY12). Construction of the building of Punjab Conware CFS has started and partial operations from the facility will commence by November end. The facility will be fully operational towards the year end. It is likely to add 1,000-2,000 TEUs to Mumbai CFS throughput after commencing operations. The company has taken aggressive steps by lowering ground rent and pricing to gain market share in the Mumbai CFS. Chennai and Vizag CFS throughput was higher at 17,214 TEUs (up 2% QoQ) and 9,821 TEUs (up 7% QoQ) respectively for Q1FY13. Vizag is now operating at high utilization levels of ~80%. Kochi CFS has commenced partial operations (on wheel operations) and is likely to commence full-fledged operations post the completion of construction of warehouse (September 2012-end) Rail business Faridabad ICD is likely to get delayed further as there has been no major improvement in obtaining the approval (earlier guidance of September 2012). Realisations have dropped to INR21,000-22,000 range due to start of shorter routes (Sanand, Jodhpur etc) Current capacity of Snowman at ~22,000 pallets; management targets to increase the same to ~45,000 pallets by April 2013 and 70,000-80,000 by next 2-3 years. (this is delayed from earlier guidance of FY14) Consolidated debt at June 30, 2012 INR1,350 mn (CFS INR180 mn, GRFL INR1,070 mn and Snowman Logistics INR100 mn) Consolidated cash balance at June 30, 2012 INR1,380 mn (CFS INR1,290 mn, GRFL INR50 mn and Snowman Logistics INR40 mn) 2 Edelweiss Securities Limited

3 Gateway Distriparks Financial snapshot (INR mn) Year to March Q1FY13 Q1FY12 % Change Q4FY12 % Change FY12 FY13E FY14E Net revenues (8.6) ,173 9,658 11,916 Employee expenses (37.4) Other operating expenses ,345 6,374 8,056 Total expenditure ,730 6,829 8,617 EBITDA (19.4) ,443 2,829 3,299 Depreciation (6.4) 37 (0.8) EBIT (21.0) ,815 2,211 2,632 Other income (1.5) 23 (24.1) PBIT (20.0) ,000 2,340 2,771 Interest 2 3 (18.1) 2 (9.3) Profit before tax (20.0) ,864 2,172 2,601 Total Tax (20.8) Minority interest Net profit (19.5) ,320 1,494 1,550 Equity capital 1,080 1,080 1,080 1,083 1,080 1,080 Diluted shares (mn) Diluted EPS (INR) (19.9) As % of net revenues Employee cost Other expenses Total expenses EBITDA Reported net profit Tax rate *Note: Quarterly numbers are standalone and yearly are consolidated 3 Edelweiss Securities Limited

4 Logistics Company Description GDL, established in 1994, was initially set up as a joint venture by NTSC, Parameshwara Holdings Ltd, Windmill International Pvt Ltd and Thakral Corporation Ltd to carry on logistics business in India. GDPL is broadly divided into three business segments namely (a) CFS business, (b) container rail and (c) cold storage. The company operates container freight stations (CFS) at Navi Mumbai, Chennai, Vishakapatnam and Kochi (to be operational in FY12) and Inland Container Depot (ICD) at Garhi (Haryana), Sahnewal (Ludhiana), Kalamboli (Mumbai) and a new ICD at Asaoti (Fardibad, to be operational in FY12). In total, the company has 516,000 TEU handing capacity at its CFS facilities, 300,000 TEU s handling capacity at ICDs and 18,280 pallets handling capacity in cold storage business as on FY12. Investment Theme GDL is one of the largest CFS players in India with a capacity of 516,000 TEUs. The company is expected to ramp up its CFS capacity to 560,000 TEUs by FY13 with the resumption of full operations at Punjab Conware CFS (Navi Mumbai). CFS segment is a cash cow for the company and it generated average free cash flow of INR 850/mn/year during FY The railway segment of the company turned PAT positive in Q3FY11 and the momentum is likely to continue with better utilization of the available capacity and start of Faridabad ICD in September Snowman logistics (company s cold storage arm) is the leading player in India in cold storage segment and presents a large scope for growth with a fourfold capacity increase within next 3 years (from FY11-FY14). Key Risks Congestion and delay in start of fourth terminal at JNPT port can impact the throughput of the Mumbai CFS (main contributor to company s CFS earnings) Intense competition, adverse macro environment and deficiency of adequate infrastructure also pose a threat to the company s growth. 4 Edelweiss Securities Limited

5 Gateway Distriparks Financial Statements Key Assumptions Macro - GDP(Y-o-Y %) Inflation (Avg) Repo rate (exit rate) USD/INR (Avg) Company - Total CFS throughput (TEUs) 303, , , , ,840 Mumbai CFS realisation 7,360 7,944 10,157 8,532 8,788 GRFL throughput (TEUs) 112, , , , ,500 Income statement (INR mn) Net revenue 5,166 5,991 8,173 9,658 11,916 Total operating expenses 3,917 4,394 5,730 6,829 8,617 EBITDA 1,249 1,597 2,443 2,829 3,299 Depreciation & Amortization EBIT 795 1,094 1,815 2,211 2,632 Other income Interest expenses Profit before tax 724 1,041 1,864 2,172 2,601 Provision for tax (79) Net profit 803 1,001 1,356 1,569 1,898 Minority int. and others - paid/(recd.) Profit after minority interest ,320 1,494 1,550 Shares outstanding (mn) Diluted EPS (INR) Dividend per share (INR) Dividend payout (%) Common size metrics - as % of net revenues Operating expenses EBITDA margins EBIT margins Net profit margins Growth ratios (%) Rev. growth (%) EBITDA (15.1) Net profit EPS growth (%) (0.7) Edelweiss Securities Limited

6 Logistics Balance sheet (INR mn) As on 31st March FY10 FY11 FY12 FY13E FY14E Equity capital 1,079 1,080 1,083 1,080 1,080 Reserves & surplus 5,563 5,799 6,395 7,123 7,915 Shareholders funds 6,642 6,879 7,478 8,203 8,995 Minority interest (BS) ,074 Borrowings 2,099 1,154 1,037 1,465 4,027 CCPS in GRFL - 2,958 2,958 2,958 - Deferred tax liability Sources of funds 9,554 11,741 12,275 13,492 14,235 Total fixed assets 8,703 9,832 10,171 11,661 12,673 Investments Sundry debtors ,449 1,787 Cash and equivalents 795 1,506 1,662 1,687 1,488 Loans and advances Other current assets Total current assets 2,003 2,881 3,314 3,892 4,034 Sundry creditors and others 1, ,571 1,982 Provisions Total current liabilities & provisions 1,307 1,105 1,210 2,063 2,475 Net current assets 696 1,776 2,105 1,828 1,559 Miscellaneous expenditure Uses of funds 9,554 11,741 12,275 13,492 14,235 Book value per share (INR) Free cash flow (INR mn) Year to March FY10 FY11 FY12E FY13E FY14E Net profit ,320 1,494 1,550 Depreciation Deferred tax 3 (48) Others (17) Gross cash flow 1,232 1,500 2,053 2,226 2,595 Less: Changes in WC (396) 409 (180) 51 (70) Operating cash flow 1,628 1,091 2,234 2,175 2,666 Less: Capex 1,014 1, ,228 1,679 Free cash flow 614 (391) 1,403 (53) 987 Cash flow metrics Year to March FY10 FY11 FY12E FY13E FY14E Operating cash flow 1,628 1,091 2,234 2,175 2,666 Investing cash flow (883) (1,602) (609) (2,099) (1,540) Financing cash flow (543) 1,222 (829) (690) (1,325) Net cash flow (614) (199) Capex (1,014) (1,482) (831) (2,228) (1,679) Dividends paid (442) (756) (758) (758) (758) Share issuance/(buyback) Edelweiss Securities Limited

7 Gateway Distriparks Profitability & efficiency ratios ROAE (%) ROACE (%) Debtors days Payable days Cash conversion cycle (days) (26) (36) (20) (27) (31) Current ratio Debt/EBITDA Debt/Equity Interest coverage Operating ratios Total asset turnover Fixed asset turnover Equity turnover Valuation parameters Diluted EPS (INR) Y-o-Y growth (%) (0.7) CEPS (INR) Diluted PE (x) Price/BV (x) EV/Sales (x) EV/EBITDA (x) EV/EBITDA (x)+1 yr forward Dividend yield (%) Peer comparison valuations Market Cap P/E P/BV ROE Price INR bn FY13E FY14E FY13E FY14E FY13E FY14E GDPL Allcargo CONCOR Edelweiss Securities Limited

8 Logistics Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai Board: (91-22) , Vikas Khemani Head Institutional Equities Nischal Maheshwari Co-Head Institutional Equities & Head Research Nirav Sheth Head Sales Coverage group(s) of stocks by primary analyst(s): Pipes and Logistics Gateway Distriparks, Jindal Saw and PSL Ltd Recent Research Date Company Title Price (INR) Recos 01-Aug-12 PSL Solid order book; Result Update 27-Jul-12 Jindal SAW DI pipes to drive future earnings growth ; Result Update 01-Jun-12 PSL Pipe sales pleasantly surprise; Result Update 59 Buy 125 Buy 56 Buy Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Rating Interpretation Buy Hold Reduce Total Rating Distribution* * 1 stocks under review > 50bn Between 10bn and 50 bn < 10bn Market Cap (INR) Rating Buy Hold Reduce Expected to appreciate more than 15% over a 12-month period appreciate up to 15% over a 12-month period depreciate more than 5% over a 12-month period 8 Edelweiss Securities Limited

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