This logistics stock is trading at a 40% discount to the high, buys for 118% upside

Gati Ltd is a logistics-focused small cap with a market capitalization of 1,631 crores. On the NSE, shares of Gati Ltd hit a 52-week high of 221.90 on Jan 18, 2022 and a 52 week low of 120.00 on August 23, 2021, implying the stock is now trading at a 40% discount to its 52-week high of 132 per share. ICICI Securities issued a call to buy on Gati with a target price of 288. This represents a potential increase of 118% from the current level.

ICICI Securities said in a note that “We visited the Farukh Nagar sorting center in Gati, Haryana. Its 113,000 square foot facility is located inside the Allcargo Logistics Park. Farukh Nagar helped Gati consolidate three different former NCR hubs into 84,000 square feet enabling the benefits of consolidation, cross-docking (with 89 bays), dock leverage, better IT integration planning and better connectivity. According to management, the current infrastructure is adequate to meet the infrastructure needs of the NCR of Gati for the next 10 years. Gati CEO Pirojshaw Sarkari reiterated three-year exit revenue run rate of Rs30bn and FY23E exit gross margin/EBITDA run rate of 29/9% and run rate FY24E exit gross margin / EBITDA of 32 / 12-15%, respectively. There will be no significant increase in rental charges despite the arrival of seven new sorting centers, Gati abandoning the old sorting centers.”

The brokerage said: “We are maintaining BUY on Gati with a target price of Rs288/share, at 30x FY24E earnings. We see the potential for strong improvement in yield ratios for Gati as revenue and margin reach their potential. Currently, Gati’s (past) goodwill is approximately Rs 4.3 billion and assets held for sale are approximately Rs 1.8 billion.”

Gati shares gained 1.29% today after 5 days of consecutive falls of 3.86%. In one year, the stock has fallen 12.45%, and year-to-date (YTD), the stock has fallen 29.32% so far in 2022. The stock has fallen 19.48 % over the past six months and 4.27%. over the past month. Gati is now trading below the 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The stock has a P/E of 190.07 and a book value per share of 49.77, implying that it is now trading at 2.67 times its book value.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

To subscribe to Mint Bulletins

* Enter a valid email

* Thank you for subscribing to our newsletter.

Comments are closed.