Hold Gateway Distriparks, target of Rs 140: PINC

PINC Research has downgraded its rating to hold on Gateway Distriparks with a 12-month price target of Rs 140 in its May 5, 2008 research report. "Gateway Distriparks Ltd’s (GDL) Q4FY08 results were in line with our estimates as revenues grew by 78% YoY to Rs 835 million. However, it disappointed on the profitability front as net profits slumped 19% to Rs 165 million."

"At the CMP of Rs 121, the stock trades at a P/E of 11.7x and EV/EBIDT of 7.1x FY10 estimates. GDL continues to invest in rail transport and cold storage, which should yield higher revenues in the long run. Due to its expansion, GDL faces margin pressure in the interim as the new businesses are yet to stabilise and attain scale. Thus, there will be turbulence in earnings for the next few quarters. In view of the rich valuations, mounting start-up costs, capital charges and uncertainty in achieving break even in new businesses, we downgrade our recommendation to ‘HOLD’ with a 12-month price target of Rs140, says PINC research report.

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