ICICI Direct recommended hold rating on Gati with a target price of Rs 90 in its research report dated November 20, 2018.
ICICI Direct's research report on Gati
Revenues for Q2FY19 grew 15% YoY to Rs 465.7 crore (I-direct estimate: Rs 446.4 crore). Express distribution and supply chain (EDSC) grew 11% to Rs 369.5 crore. The growth was further accelerated by 29% and 54% YoY growth in fuel and other sales, respectively EBITDA margins stayed flattish at 4.8%, as higher operating cost to sales ratio (up 240 bps to 77.5%) was negated by fall in employee cost (down 120 bps YoY to 10.1%) & other expenses to sales ratio (down 110 bps YoY to 7.7%). Hence, EBITDA grew 16% YoY to Rs 22.4 crore However, PAT de-grew 87% to Rs 2.6 crore mainly due to the presence of an exceptional income of Rs 23.7 crore in Q2FY18 (on account of exchange gain on conversion of FCCB).
Given these strategic decisions, we have a HOLD recommendation on the stock with a target price of Rs 90 (at P/E multiple of 29x FY20E).
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