Gateway Distriparks
Cluster: Cannonball
Recommendation: Buy
Price target: Rs250
Current market price: Rs160
Gateway forms a 51:49 JV with Concor
Key points
- Gateway Distriparks Ltd (GDL) through its subsidiary Gateway Rail has formed a 51:49 joint venture with Container Corporation of India (Concor) to construct and operate a rail-linked double-stack container terminal at Garhi-Harsaru, 7 kilometre from Gurgaon in Haryana.
- The rail-linked inland container depot (ICD) currently operated by GDL will be transferred to the joint venture. The excess land (approximately 70 acre) owned by GDL will also be transferred to the joint venture and GDL will earn lease rentals on the same.
- The total cost of setting up the joint venture will be Rs70 crore which will be funded in the debt/equity ratio of 2:1.
- The revenues (handling charges and ground rent) arising from the joint venture will be shared in the ratio of the stakes held by the two companies.
- The profits from the rail operations for the movement of container rakes from the Garhi ICD to the ports will be equally shared between GDL and Concor.
- We maintain our bullish stance on the company as it will be the direct beneficiary of the growth in container traffic, which currently accounts for just 10% of the total cargo.
- The stock has significantly underperformed the Sensex in the last three months, declining by 21% over the period. So we believe this to be a good buying opportunity for the investors and thus maintain our Buy recommendation with a price target of Rs250.
VIEWPOINT
Glenmark Pharmaceuticals
An all-round growth
The recent developments on Glenmark are indicative of the management’s aggressiveness in growing the company. The management has been undertaking an all-round effort to grow in all the different segments of the business, whether it is expanding its product basket in the USA and Latin America, entering new markets like Europe or creation and unlocking value from assets created out of its research and development (R&D) assets. Through selection of niche, difficult to manufacture products with limited competition for the US market, Glenmark has been able to capitalise on each of its products and grow its US business by leaps and bounds. The recent disclosure of its Para IV ANDA filing for generic Ezetimibe (for which it is the only ANDA filer till date) is reflective of the strong product selection strategy of the company. Further, Glenmark has positioned itself as a truly innovative, research-driven company by the successful creation and unlocking of value of its IP assets.
Glenmark is upbeat about its growth prospects for the next two years, with its US and Latin American business being the major growth engines. As per the company's projections, it is planning to grow at a CAGR of 52% over FY2006-08E to $379 million, with the profits growing at a CAGR of over 137% over the same period to $115 million. The company has given earnings per share (EPS) guidance of Rs23.6 per share in FY2007E and Rs43.8 per share in FY2008E. The projected EPS however includes the anticipated milestone payments of $31 million in FY2007 and $69 million in FY2008. On excluding the impact of the uncertain milestone payments, the EPS would reduce by 50%.
MONSOON WATCH
Indian monsoon outlook gets a fillip
In our Special Market Outlook issue “Setting sights on 16000” dated January 02, 2007, we had mentioned about certain risks among which El Nino and its impact on the Indian monsoon were important ones. We had also mentioned that we needed to follow the development of the El Nino pattern. In this write-up we have revisited the latest developments surrounding the El Nino weather pattern
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