Dalal Broacha Gati Ltd

Topics: Supply chain management, Supply chain, Logistics Pages: 14 (5525 words) Published: March 12, 2015
Dalal & Broacha
Stock Broking Pvt. Ltd.

..
..
..
..
..

Initiating Coverage @ Dalal & Broacha

Gati Ltd.
Ankit Panchmatia (Research Analyst)
(022) 6714 1449
Milind Karmarkar (Head Research)
(022) 6630 8667
Sandeep Shah/Nilay Dalal (Equity Sales)
(022) 6714 1443

January 20, 2015

ACCUMLATE

Curre nt Pri ce
Ta rge t Pri ce
Upside
52 We e k Ra nge
KEY SHARE DATA
Ma rket Ca p
EV / Sa l es
EV / EBIDTA
Vol ume (BSE + NSE)
No of o/s s ha res
Fa ce Va l ue
Book Va lue
BSE / NSE
Reuters
Bl oomberg

SHAREHOLDING (%)
Period
Promote rs
MF / Ba nks / FI
FII
Publ i c & Othe rs
Total
900

Rs 277
Rs 332
20%
Rs 32 / Rs 342

India, with 16% of the global population, prospective strong GDP growth and increasing E-commerce penetration is likely to present huge business opportunity for the logistics sector. This is also apparent from the fact that international giants like UPS & DHL see significant growth in their business being driven by India and China.

Well-geared to capitalize on emerging economy
In India, nearly 40% of the logistics market is unorganized. We expect Rs 24.0 BN/$399.7MN consolidation in the sector and the share of unorganized sector to reduce further. With a market share of ~16% in surface segment, Gati is all set to emerge as one 2.2

of the key beneficiaries of the overall GDP and trade growth. 34.4
423764
86.6
2
90.9
532345 / GATI
GATI.BO
GTIC IN Equi ty

Sep-14
38.1
8.1
0.2
53.6
100.0

Gati

Jun-14
34.9
0.3
6.5
58.3
100.0

Sensex

800
700
600

Positive synergies from Kintetsu World Express
KWE caters to supply chain requirements of a wide base of global customers. Indian operations of these customers will be served by Indian JV (Gati-KWE), due to which it has recently signed couple of large Japanese customers like Sharp, Idemitsu, Sony, Pioneer etc. One of the key strategies for KWE is to expand its presence in emerging countries and India is most preferred.

Vast domestic reach to capitalize on E-Commerce Logistics
Gati is one of the largest players in road segment with a pan India network present in 667 districts out of 675 districts. Additionally, it offers Cash on Delivery which is essential for E-commerce service and is offered in more than 10000 pin codes. Moreover, additional services like Gati e-Pack, Gati e-Pick, Gati Reverse Pick-up and warehousing will take its scale of operations to a higher level going ahead.

Broad-based growth to perk up revenues
Opportunities in Gati Kausar & e-Tailing and synergies from KWE will provide a broad based growth across business segments. We expect the E commerce business to lead the earnings growth with ~70% CAGR over FY14-FY17E, followed by Gati Kausar and Gati KWE growing 28% and 27% respectively. Furthermore, growth in high margin business and winding down losses from Gati Ship will propel profitability. The consequent revenue growth is estimated at ~31% CAGR over FY14-FY17E, and likely to be broad-based with all businesses contributing. Growth in high margin business, buoy return ratios

In Q2FY15 the company has sold its ~30% stake in Gati Kausar for Rs.150 crore. These funds will primarily be utilized to construct 10 cold chain warehouses. Going ahead the company intends to increase the package delivery capacity. Capitalizing on the economies of scale, we expect the company to improve its ROE from 3% to 10% over CY14-17E.

500
400
300
200
100

Valuation:
At CMP the stock trades at 26x FY16E earnings of Rs. 10.7 and 19x FY17E earnings of Rs. 15. We recommend a "BUY" with a target price of Rs. 332.

0

Year
FY 13
FY 14 (9-m th s )
FY 15E
FY 16E
FY 17E

Net Sales
12,729.5
11,165.7
17,432.8
20,997.1
25,226.6

% G rowth
7.2
-12.3
56.1
20.4
20.1

EBID TA
821.7
841.1
1,904.0
2,488.0
3,109.5

OPM %
6.5
7.5
10.9
11.8
12.3

PAT
96.3
234.2
620.4
935.9
1,248.2

Dalal & Broacha Research is available on Bloomberg DBVS

% G rowth...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay on Blackmores Ltd
  • Blackmores Ltd Essay
  • The Islay Whisky Company Ltd Essay
  • Dalal Street Essay
  • Imasco Ltd Essay
  • Essay on Ambuja Cement Ltd
  • Chocoban Ltd. Essay
  • Infosys Ltd Essay

Become a StudyMode Member

Sign Up - It's Free