Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gateway Distriparks Ltd (BOM:543489, Financial) maintained its market share in the NCR region, showing resilience despite a tough quarter.
- The company is seeing improvements in port congestion and vessel schedules, which could positively impact future volumes.
- Gateway Distriparks Ltd (BOM:543489) is not compromising on EBITDA margins despite lower volumes, indicating a focus on profitability.
- The company is actively exploring the sale of its CFS assets, which could unlock significant value.
- Snowman Logistics, a subsidiary, is expected to grow its 5PL business by over 25% year-on-year, indicating strong growth potential in this segment.
Negative Points
- Gateway Distriparks Ltd (BOM:543489) experienced a decline in rail volumes, particularly in regions like Uttarakhand and Ludhiana due to pricing competition and lower imports of low-value commodities.
- The company's EBITDA margin has slipped due to lower volumes and a decrease in double stacking percentage.
- There is ongoing uncertainty in global markets, particularly in the US and Europe, which could impact future growth.
- The company is facing challenges in the waste paper and scrap import segments, which have seen significant declines.
- The Jaipur terminal project is still facing litigation issues, which could delay its operational timeline.
Q & A Highlights
Q: This quarter has clearly been a very tough quarter given the macro situation. Can you explain what's really happening with the rail industry volumes and our weak volumes?
A: (Samvid Gupta, Joint Managing Director) The impact of port congestion and erratic vessel schedules continues, though there has been some improvement towards June and July. We have maintained our market share compared to Q4, but on a year-on-year basis, we have lost market share in places like Uttarakhand and Ludhiana due to pricing competition. Imports of low-value commodities like waste paper and scrap, which used to contribute significantly, remain weak.
Q: What is the outlook for volumes for the balance part of the year?
A: (Samvid Gupta, Joint Managing Director) Volumes will be better than Q1, but global uncertainties and subdued demand in the US and Europe make it difficult to provide clear guidance. We will wait another quarter to give proper guidance.
Q: In terms of the margin profile for the rail business, what should we expect moving forward?
A: (Prem Kishan Dass Gupta, Chairman And Managing Director) We are not compromising on margins. The EBITDA margin has slipped slightly due to low volumes and a decrease in double stack percentage. However, business from existing customers is improving, and we are taking additional business at lower margins on a spot basis. We expect EXIM growth to continue, but the pace will be clearer by the end of this quarter.
Q: Any progress on selling or monetizing the CFS land?
A: (Prem Kishan Dass Gupta, Chairman And Managing Director) We are evaluating our CFS assets at five locations. We are looking for a proper valuation and are not in a hurry to sell. Our expectation is high, and we want to get out of the CFS business due to intense competition and low margins.
Q: What kind of volume growth do you expect for the next two years?
A: (Prem Kishan Dass Gupta, Chairman And Managing Director) The volume decline has been in the rail business in Q1, while CFS has maintained the same volume. We expect to regain rail volumes in this quarter. We are targeting double-digit growth, but it depends on macroeconomic factors.
Q: Can you elaborate on the accounting policy change that impacted CFS revenue by INR8.43 crores?
A: (Samvid Gupta, Joint Managing Director) The change involves discounting being passed on, which was earlier counted in the revenue. As per the new accounting standard, this comes under gross revenue but is removed under net revenue. This change does not affect operational costs or EBITDA per TEU.
Q: What is the outlook for the NCR and Ludhiana markets?
A: (Samvid Gupta, Joint Managing Director) The NCR market has been flat, while Ludhiana saw a significant dip of about 15% to 20% in the overall market. The competitive intensity remains high, and we are not providing specific guidance due to macroeconomic uncertainties.
Q: What is the status of the Jaipur facility?
A: (Prem Kishan Dass Gupta, Chairman And Managing Director) We expect the Jaipur facility to be operational in about 12 months from now.
Q: How much of our volume comes from low-value products like scrap paper?
A: (Rajguru Behgal, President - Rail) Low-value commodities like waste paper constitute about 20% of our overall volumes, with significant contributions from markets like Ludhiana and Kashipur. We are targeting new waste paper and scrap importers to improve these volumes.
Q: How do you plan to use the funds generated from monetizing CFS assets?
A: (Prem Kishan Dass Gupta, Chairman And Managing Director) It's too early to say. We are running the CFS business at full capacity and will decide on fund deployment once we get a proper valuation. Rail business expansion is a potential area for deploying these funds.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
