Gati trades at multiyear high; what is reviving the company and what is the Amazon connection?
Gati caters to the e-commerce logistics and the majority of revenues come from not more than couple of major e-commerce players. This may be risky in long run but as the sale increases for Amazon – Gati benefits.
Transport and logistics industry has taken a heavy beating in the past two years. In fact it has been one of the most adversely impacted sectors in the current pandemic. Gati has been negatively impacted due to the lockdown as well. The financials reflect the pain faced by the company on ground in past few quarters. However the long term investors are seen accumulating Gati, as the enthusiasm is seen on the bourses in terms of stock price gain.
Investing is all about betting on the improving prospects if it is beleaguered company. Investors positive on Gati are betting on improving financials as the new management has took over and is focusing on improving efficiency. Gati has decades of experience in the logistics field and with Allcargo as the new promoter there is some diversification of customers expected which can be a positive trigger for the company in the long run. Under the new management restructuring of the business is expected which may lead to improvement in return ratios as Gati moves towards an asset-light business model. Under the new management the company is also selling its non-core assets which will help company focus on its core-competencies and reduce debts. The stock price has also gone up because the overall consolidated debt has been reduced by 70 per cent in one year since the takeover by Allcargo.
Gati caters to the e-commerce (logistics) industry also and the revenues may increase for Gati as the e-commerce market grows in India . Gati has Flipkart and Amazon as few of its biggest clients. As the business grows for Flipkart and Amazon - Gati benefits!
In one year the stock is up by 234 per cent and on YTD basis the stock is up by nearly 50 per cent. In past one month alone the stock is up by 19 per cent.