Broking firm Sharekhan is upbeat on the stock of logistics player GATI and has recommended a buy on the stock for gains of up to 38%. Gati Limited is one of India's premier Express Distribution and Supply Chain Management companies, with end-to-end logistics solutions backed by future-ready digital tools and technology.
Why Sharekhan has a buy call on the stock of GATI?
According to the broking firm, the management's focus during FY2023 would be on increasing revenues and operating margins in express business.
"It has been taking measures over trailing six months on building infrastructure (leased transhipment hubs to aid volume growth), talent acquisition (completed major hiring across all areas) and customer centricity (streamlining operations). It expects the MSME segment within express to grow at a faster rate during FY2023. The company also added large automotive customers during Q4FY2022," Sharekhan has said.
Digitization remains solid at the company
GATI has completed digitisation of its front end operations with Saleforce.com handling sales and customer service. The company believes the back end digitisation is a continuous process which requires technology upgradation. It also completed an A&M consultancy during February which was a part of its transformation journey. Hence, from March 2022 onwards, consultancy fees would be charged under other expenses. GATI has reorganised its sales structure to get new businesses and depending on the performance would move it to key customer accounts.
Buy the stock for gains of 36-38%: Sharekhan
Sharekhan believes GATI is undergoing a transformational journey led by new parentage and motivated new management team.
"The company has been able to strengthen its balance sheet, trim unrelated businesses, exit from non-core assets, rationalise cost structure, which would further continue in the next two years. At the same time, we expect consolidated profit to witness non-linear growth over coming years led by a healthy double-digit revenue growth and significant expansion in OPM. At current market pricing, the stock is currently trading at a P/E of 19.6x its FY2024E EPS, at a discount to most of its peers. We expect the valuation multiple gap vis-à-vis peers to narrow down as Gati's earnings trajectory improves. Hence, we retain a positive view on the stock with an upside potential of 36-38%," the brokerage has said.
The stock is taken from the report of Sharekhan. Investors and readers should not construe the above report as investment advice and due to their own due diligence before taking any risky calls. Neither the author, nor Greynium Information Technologies Pvt Ltd, nor the brokerage should be held responsible for any losses incurred based on the above article.