Buy Gati, target price Rs 250: ICICI Securities

ICICI Securities has buy call on Gati with a target price of Rs 250. The current market price of Gati Ltd. is Rs 161.55.
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 1983.49 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 30-06-2022, the company reported a Consolidated Total Income of Rs 436.72 Crore, up 12.93 % from last quarter Total Income of Rs 386.73 Crore and up 49.89 % from last year same quarter Total Income of Rs 291.36 Crore. Company reported net profit after tax of Rs 6.59 Crore in latest quarter.

Investment Rationale
Gati’s Q1FY23 revenues and margins reflect improvement in the business with consolidated EBITDA margin at 4.4% (up from 0.9% QoQ), nevertheless short of expectations. Also, interest and depreciation have charted a higher than expected path, presumably as the Ind-AS driven lease cost expenses flow through – leading to earnings downgrade. More such positive margin shifts (along with expanding PAT margin) will enforce faith in success of the ongoing business transformation. Management has lined out the key pillars for sustainable/profitable growth, of which ‘sales acceleration’ and ‘infrastructure’ are key. It concurs with the management vision of 3x revenue growth and improved margin profile over next three years. This will potentially allow expansion of profitability, earnings as well as valuation multiples over FY23E-FY24E. Maintain BUY with a revised target price of Rs250/share (from Rs288/share earlier).

Promoter/FII Holdings
Promoters held 51.53 per cent stake in the company as of 30-Jun-2022, while FIIs owned 2.16 per cent, DIIs 1.28 per cent.