For the largest player in the container freight station (CFS) segment at Mumbai's JNPT and with a significant presence in other ports, weak demand from India's key trading partners has resulted in decline in volumes and revenues. In the December quarter, exports from India have registered negative growth, while import growth has moderated. The volume decline has meant that Gateway, (operates CFSs at Mumbai, Chennai, Vizag and Kochi) will finish FY09 with single digit growth y-o-y to about 4 lakh TEUs (twenty-foot equivalent units) compared with a 49 per cent y-o-y growth in FY08.
In addition to CFSs (over half of revenues), Gateway also has a presence in the rail freight (35 per cent of revenues) and cold chain (7 per cent) businesses. While profits at the operating level will come from its core CFS business (contributes 90 per cent to Ebidta), revenue growth in FY10 will be driven by its rail freight/inland container depot business. While its rail business (with 14 rakes operational) is currently loss-making, its advantages over road transport, large volumes and connectivity to industrial hubs is expected to translate into increased revenues for the largest private rail freight operator in the country. A strong presence in the CFS business and an expanding rail freight infrastructure with good business prospects will help the company post improved growth rates in the long term. And obviously, any improvement in economic growth rates will provide a trigger for this stock. Expect returns of about 15-20 per cent over the next 15 months
Source : Business-sandard