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 Ltd. is Rs 200.
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 2454.46 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 30-09-2021, the company reported a Consolidated Total Income of Rs 401.31 Crore, up 37.74 % from last quarter Total Income of Rs 291.36 Crore and up 16.22 % from last year same quarter Total Income of Rs 345.29 Crore. Company reported net profit after tax of Rs 45.49 Crore in latest quarter.


Investment Rationale
The brokerage initiates coverage on Gati with a BUY rating and target price of Rs288/share (30x FY24E P/E). Gati, along with Safexpress, TCI Express, Blue Dart, and Delhivery, remains one of the key organised express logistics players pan-India. Recent acquisition (CY19) by Allcargo has revived Gati’s corporate ambitions of reclaiming the best express logistics player status in the country. The actions taken, under the new management team, to stem past 7-8 years of market share loss appear promising. It concurs with management vision of 3x revenue growth with improved margin profile over next three years. This will potentially allow expansion of profitability, earnings as well as valuations multiple over FY22E-FY24E. It studied the impending IPOs of new-age logistics players and their implied valuations – and it finds Gati’s valuation much more nominal and conducive, given its underlying profitability and growth potential. Execution shortfalls, industry slack, heating-up of competition and corporate actions are key risks to the call.

Promoter/FII Holdings
Promoters held 51.93 per cent stake in the company as of 30-Sep-2021, while FIIs owned 2.25 per cent, DIIs 1.68 per cent.