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Gateway Distriparks
Cluster: Cannonball
Recommendation: Buy
Price target: Rs250
Current market price: Rs159
Financials continue to impress
Key points
- During FY2006 GDL registered a 45% growth in its revenues on the back of a 14% rise in the throughput handled and a 30% increase in the realisation per twenty-foot equivalent units (TEUs).
- The growth in the volume and the realisation improved GDL's operating profit margin (OPM) by 540 basis points from 55.1% to 60.4%. Consequently the operating profit jumped by 59.1% to Rs83.8 crore.
- Towards the end of FY2006, GDL had come out with a USD85-million global depository receipt (GDR) issue and garnered around Rs375 crore. As the majority of the funds had not been utilised, the same had been deposited in banks. The cash that GDL had on its books was utilised to pay off its debts worth Rs50 crore. Hence we saw a very significant nine-fold jump in its other income and a 45% decline in its interest charge in FY2006.
- Although with the repayment of the debts GDL's debt/equity ratio has come down to 0.06, yet the excess un-utilised capital is hurting its return ratios. Its return on capital employed (RoCE) has come down from 27% to 20% and its return on net worth (RoNW) has fallen from 21% to 12.7%.
- In 2006 GDL commenced its rail container freight (RCF) service. It is now setting up its second rail linked inland container depot (ICD), which will ply on electric route connecting the Jawaharlal Nehru Port Trust (JNPT) to northern India.
- GDL has expanded the capacity of its container freight station (CFS) at JNPT by 36,000 TEUs to 216,000TEUs. Further with huge cash of Rs352 crore on its books, GDL is now actively looking to acquire an existing CFS at Nava Sheva.
- JNPT is all set to commission its third container terminal at Nava Sheva, taking its container handling capacity from 2.4 million TEUs currently to 3.6 million TEUs. Hence GDL's move to expand its Nava Sheva facility augurs well for its profitability.
SECTOR UPDATE
Pharma
Data protection cheers MNC pharma!!
Key points
- The Government of India is on the verge of allowing 5-year data protection.
- Data protection implies the safety of the clinical trial and test data provided to the regulatory authorities by innovator drug companies. This means that other companies cannot make use of the innovator's data to obtain marketing authorisations for drugs.
- The implementation of data protection would enhance the confidence among the MNC associates to launch innovative products in the domestic market. Indian subsidiaries have been traditionally restricted from launching new products from their parent's portfolio due to lack of data protection.
- The regulation is likely to benefit Indian companies, which have shifted their focus from being pure generic players to innovative players, as it would protect their research data from being copied in the future.
- The increasing launch of new products by MNCs would increase the pressure on domestic companies to reduce drug development costs. This would provide a boost to players in the contract research and clinical data management space.
VIEWPOINT
Monsanto India
Sowing seeds of growth
We recently attended the annual general meeting of Monsanto India Ltd (MIL). The company is a 72% subsidiary of Monsanto Co., USA and is in the business of manufacturing and selling herbicides (used for controlling weeds) and seeds (corn and sunflower). The company is not to be confused with Mahyco Monsanto, another joint venture of Monsanto that sells the controversial BT cotton seeds.
As the herbicide and agrochemical market has become increasingly generic and competitive, MIL's focus has shifted towards the higher margin seeds business. The contribution of the seeds business has jumped from 21% of revenues in FY2001 to 53% in FY2006. As part of this portfolio restructuring, MIL has sold one of its herbicide products, Leader, to Sumitomo Chemicals recently.