Gati Delivers Another Express Quarter

Gati which is one of the leading companies into the business of express cargo announced its December 2013 quarter results yesterday. The results have been good and better than the street estimates. All the three major segments (viz – Gati – KWE, Gati Kauser and E-commerce) have performed well helping the company to put in a strong performance on topline as well as bottomline front.

For the quarter ended December 2013 it posted a consolidated topline of Rs 374 crore as against Rs 333 crore posted in corresponding quarter preceding year. As at the EBITDA levels, it posted an EBITDA of Rs 34 crore against Rs 30 crore posted in December 2012. As regards the bottomline, the consolidated PAT for the December 2013 quarter stood at Rs 8.70 crore as against Rs 7.80 crore in December 2012. 

As the company closes its books in June quarters, the December quarter is also a half year result for the company. Here for H1FY14 the topline stood at Rs 741 crore as against Rs 641 crore in H1FY13. EBITDA for the similar period stood at Rs 63 crore and Rs 52 crore respectively. As for bottomline, the company witnessed some amount of improvement in shipping business, the PAT for the H1FY14 stood at Rs 14.50 crore against Rs 2.50 crore in H1FY13. 

If we take a look at the segmental performance, the Gati KWE (Express Delivery Business) posted strong 16 % growth in revenues. The revenues for December 2013 stood at Rs 261 crore (Rs 226 crore in December 2012). EBITDA for the December 2013 quarter was Rs 29 crore (Rs 23 Crore). This clearly showed that the EBITDA margins have improved to 11.10% as against the 10.20 % earlier. Management in the preceding quarter had guided the investors about possible improvement in EBITDA margins. 

The cold chain segment Gati Kausar also posted a good performance. It registered a growth of 6% YoY and the business revenues stood at Rs 11.6 crore for the quarter, with operating margin at 15%.  In this segment, it is targeting to expand fleet size to 350 vehicles by 2015, for long haul and secondary distribution primarily through lease model. The company also plans to commence operations of cold storage warehouses near Gurgaon for which it is in talks with partners for real estate and technology support.  Going forward, the company will focus primarily on consumer goods, pharmaceuticals, retail and agriculture-foods sector as an integrated cold chain service provider. As for the E-commerce segment, for H1FY’14, it recorded a revenue of Rs 25 crore, registering a YoY growth of 128%, out of which Rs 14.6 crore was earned in Q2 due to season uptake.

Here the management has suggested that its focus for the next quarter would be on air shipments, new packaging and e-fulfilment centres at major cities and launching reverse logistics services.

The financial performance has been good for the company. Further, as the economy starts showing growth, logistic companies like Gati would automatically start showing additional growth.

We had recommended Gati to DSIJ investors in one of our preceding issue at Rs 50 with a target price of Rs 68. The target price has been achieved and hence we recommended the readers to book profit in the counter. However as the stock still has some growth potential, high risk taking investors can take exposure to the counter with a long term perspective.