| The firm's margins could remain under pressure in a competitive environment; also the railway operations are yet to stabilise.
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 If container logistics firm Gateway Distriparks' consolidated revenues have seen a sharp growth of 78 per cent in the March 2008 quarter, it's because of the new container rail business, the foray into cold storage through the Snowman acquisition and the Punjab Conware freight station.
On a sequential basis however, the rise in sales was a subdued 16 per cent because of slightly lower realisations in a highly competitive environment. Moreover, higher costs resulted in the operating profit margin(opm) for the quarter crashing 1400 basis points y-o-y to 32.8 per cent.
The Rs 268 crore firm operates container freight stations at major ports in India and also provides related services. Capacity utilisation at the Punjab Conware station has been lower at around 50 per cent levels compared with 85 per cent levels for the JNPT station and going ahead, this segment should see revenues growing by about 10-15 per cent.
However, Gateway has lost some market share at JNPT and thus its margins could remain range-bound for a couple of years, till another terminal becomes operational with pricing dependent on the co-operation among players.
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| A delay in the commissioning of EXIM routes in the joint venture with Concor, lower than expected profitability in the domestic segment and higher than expected depreciation and amortisation charges have meant continuing losses in the container rail business. Gateway plans to invest about Rs 400 crore in this segment.
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| Gateway could see reasonably good growth in sales in FY09 driven by higher capacity and stronger traffic. However, higher costs and the relatively low margins in the domestic segment could mean a very small growth in earnings.
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| Gateway is expected to close FY09 with revenues of about 450 crore and net profits of Rs 75 crore
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| At the current price of Rs 120, the stock trades at 18 times FY09 estimated earnings and 14.5 times FY10 earnings and is expensive given that margins will be under pressure and that less than efficient execution could hurt earnings growth in FY10.
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| Cairn India: Oil's well
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 Despite a fall in its share of production of oil and oil equivalents by 9 per cent, oil producer Cairn India has leveraged the 64 per cent y-o-y surge in global crude oil prices in the March 2008 quarter to turn in a net sales growth of 33.6 per cent to Rs 316 crore.
The Rs 1012 crore company's operating profit margin expanded 1830 points to 65.3 per cent driving an operating profit ( excluding write-offs relating to exploration costs, amortisation, exceptional items and other income) increase of 85.7 per cent.
Cairn sells to public sector oil companies but unlike its PSU peers does not share the subsidy burden that arises from oil marketing companies not retailing finished products, such as petrol, at profitable prices to consumers. Thus , with realisations at $100 a barrel, Cairn's net profit jumped 210 per cent to Rs 116.4 crore in the quarter.
The company plans to invest in excess of Rs 7,000 crore to develop oilfields in Rajasthan and set up the accompanying pipeline network.
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| Cairn India will bear approximately 70 per cent of this cost while the remainder will be borne by ONGC which has a 30 per cent share in the oilfields. Cairn should be able to leverage the oil production from its Rajasthan oil fields in the second half of CY 09.
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| To fund the development, Cairn has already mopped up about Rs 2,534 crore from Petronas and Orient Global Tamarind Fund, at Rs 224.30 per share. The firm had a net cash position of Rs. 1,377 crore at the end of Q1 CY 08.
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| Meanwhile, much would depend on the direction of global crude prices though they are expected to remain strong over the next few quarters. If that is the case, it would provide the company with the necessary growth momentum.
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| At Rs 300, the stock trades at just a shade below its 52-week high of Rs 307.8, which was hit on May 13. The stock should remain an outperformer going forward. |
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