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Gati Ltd Q4FY14 results update

May 15, 2014, Thursday, 11:40 GMT | 06:40 EST | 15:10 IST | 17:40 SGT
Contributed by Nirmal Bang


The company reported Total Income of Rs. 383 crore which is up 3.6% QoQ and up 21% YoY on the back of 23% YoY growth seen in the Gati KWE Express Division. EBIDTA margins fell by 60 bps QoQ to 7.5% due to higher losses in shipping segment and investments made for the ecommerce segment. Core business continues to perform well with newer clientele being added, however we continue to remain cautious about its shipping business which continues to incur losses. Management expects 15-20% growth in the core business which contributes 75% to the total revenues and better traction in the ecommerce and cold chain businesses. At CMP, the stock is trading at 18x and 12x its FY15E and FY16E expected earnings and we continue to have a positive outlook on the stock.


Highlights of the Quarter

Gati’s KWE business grew by 23% YoY/4.2% QoQ at Rs.272 crore. And margins in this segment have remained flat QoQ at 9%. Company expects this segment to grow by 15-20% in FY15E and improvement in margins as well. During the quarter, the company has added 6 new business accounts due to the synergies with the JV partner. We expect the core express division business to continue to grow at a robust pace in the coming quarters.

Shipping segment revenues fell 20% QoQ to Rs. 5 crore and continued to incur losses and this time it was ~3.7 crore/ Rs.2.5 crore loss in the previous quarter. Company has made contractual agreement to sell one of it’s lose making vessels during the quarter. Post that transaction, It would be left with only one vessel for which it had signed a MoU with International Shipping Logistics FZE (ISL) which is a subsidiary of Tata Steel and has launched a new coastal service line across Kandla- Mundra-Cochin Ports. Management expects the shipping segment to post a loss of Rs.5 crore in the next quarter and thereafter would breakeven.

Kausar, the cold chain segment of the company continued to show decline in revenues. During the quarter, it reported revenues of Rs. 10.8 crore, a decline of 7% QoQ. Margins too have fallen in this segment. Overall there has been slowdown in the refrigerating business. However, company has seen better performance starting from April and this business is expected to grow by 15-17% in FY15.

E-Commerce business continues to be the focus for the company which also fetches 12-15% kind of margins. In the current quarter, this segment clocked revenues of Rs.16 crore a growth of 14.3% QoQ. Company has signed some retailers during the quarter that would drive growth in the coming quarters. Company currently is delivering ~ 12000 packages per day and aims to take this number to 20000 packages per day by June 2014.


Other Highlights

- Total debt stands at Rs.480 crore / Rs.488 crore in the previous quarter.

- Company has guided for 15-20% revenue growth for FY15E wherein express division is expected to grow by 15-20% and ecommerce by 100%.

- It has planned for a capex of Rs.20-25 crore for FY15E.

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