Recommendation from Ground Freight & Logistics Services Sector

This section gives a recommendation of a stock having a stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

GATEWAY DISTRIPARKS : EXPLORING NEW GROWTH LANES

HERE IS WHY
✓Government policies to boost sector growth
✓Expansion plan in the pipeline
✓Increase in net sales

The logistics industry is crucial for the economy and businesses as it facilitates trade and business. India’s logistics sector has improved significantly, ranking 38th out of 139 nations in the World Bank’s Logistics Performance Index. This growth is attributed to technological advancements, data-driven decisionmaking and legislative initiatives. The Indian government’s National Logistics Policy and PM Gati Shakti Programme aim to boost the sector by 2024-25. The sector is expected to grow at a CAGR of 4.5 per cent from 2022 to 2050.

By 2030, India aims to reduce logistics expenditures from 13-14 per cent to 8-10 per cent of the GDP. It is projected that a 10 per cent reduction in indirect logistics costs is expected to result in a 5-8 per cent increase in exports. Taking all this into account, our low-price scrip for this issue is Gateway Distriparks Limited (GDL). The company is a one-stop logistics shop for Indian businesses involved in international trade. It handles everything from storing goods in warehouses to transporting them between ports and the customer’s doorstep, using a mix of trains, trucks and dedicated rail terminals. 

It operates 31 rakes across India’s railway network, offering seamless connectivity between major ports and inland ICDs. It also offers dedicated block train services and reefer container services for temperature-sensitive cargo. The company owns over 525 trailers to handle 20 and 40-feet containers, including 20 CNG vehicles for ecofriendly deliveries in emission-restricted zones. 

GDL is adding two new terminals with a total capex of ₹200 crore. Kashipur is open for business now, and Jaipur is under construction and is expected to be operational in Q1 of next year, with a payback period of 4-5 years. These new places will help the company to handle even more goods for its customers. The partnership of GDL with Snowman allows for enhanced cold chain offerings, cost savings, and improved profitability. The two companies can collaborate on joint service packages, cross-selling and upselling, and unified marketing initiatives to create a stronger brand presence in the logistics market.

In Q2FY24, the net sales of the company increased by 10.97 per cent to ₹398.53 crore as compared to ₹359.13 crore in the same quarter previous year and sequentially increased by 7.80 per cent. The PBIDT excluding other income increased by 7.66 per cent to ₹103.24 crore as compared to ₹95.89 crore in the same quarter previous year and sequentially increased by 8.23 per cent. The net profit of the company increased by 23.50 per cent to ₹72.18 crore as compared to ₹58.45 crore in the same quarter previous year and sequentially increased by 15.54 per cent. 

At TTM, the shares of company are trading at a PE of 20 times, which is higher than its three-year median PE but lower than the industry PE of 39 times. The company has maintained a threeyear ROE and ROCE of 12.8 per cent and 12 per cent, respectively. It has a three-year compounded sales and profit growth of 56 per cent and 58 per cent, respectively. GDL has a debt-to-equity ratio of 0.26 times and an interest coverage ratio of 7.14 times. The company’s expansion and diversification into new segments like batteries and industrial products offer significant growth potential. Considering all these factors, we recommend BUY.