Buy Gati, target price Rs 288: ICICI Securities

ICICI Securities has buy call on Gati with a target price of Rs 288. The current market price of Gati is Rs 140.1.
Time period given by analyst is one year when Gati Ltd. price can reach defined target.

Gati Ltd., incorporated in the year 1995, is a Small Cap company (having a market cap of Rs 1727.71 Crore) operating in Logistics sector.


Gati Ltd. key Products/Revenue Segments include Diesel, Petrol & Lubricants, Freight & Demurrage and Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 386.73 Crore, down -7.04 % from last quarter Total Income of Rs 416.01 Crore and down -5.35 % from last year same quarter Total Income of Rs 408.61 Crore. Company reported net profit after tax of Rs -29.72 Crore in latest quarter.

Investment Rationale
Gati management expects express volume growth to be ~2x industry growth, gross margins to improve to 29-30% and 8% operating margin in the medium term. While the brokerage shares management optimism, the transition needs to be carried out in a time-bound manner. Revenue share in express from MSME, SME and Retail accounts stood at 42% for Q4FY22. Debt/cost of debt has significantly reduced. Management did highlight possible restructuring on i) business structure of Gati and ii) finding suitable synergies in the business of contract logistics (in Allcargo) and express logistics (in Gati). With an increased focus on MSME and Retail business during the latest restructuring of sales force, management expects ~50% of total business contribution from the same channels. The challenge that Gati faces is that infrastructure growth has to be much faster as volumes outgrow the current infrastructure. Management therefore looks forward to the super hub in Mumbai and Bangalore.

Promoter/FII Holdings
Promoters held 51.66 per cent stake in the company as of 31-Mar-2022, while FIIs owned 3.3 per cent, DIIs 1.23 per cent.