Result Update

April 28, 2016

Rating matrix
Rating
Target

:
:

Target Period
Potential Upside

:
:

Gati Ltd (GATCOR)

Buy
| 150
12 months
25%

Subdued 2016; resurgence expected in 2017

Whats changed?
Target
EPS FY17E
EPS FY18E
Rating

Unchanged
Changed from | 4.8 to | 5.2
Changed from | 5.9 to | 6.3
Unchanged

Quarterly performance
| Crore

Q4FY16 Q4FY15

Revenue
EBITDA
EBITDA (%)
PAT

428.0
37.9
8.8
15.5

YoY (%) Q3FY16

415.9
34.1
8.2
11.3

2.9
10.9
64 bps
37.0

417.8
33.9
8.1
7.7

QoQ (%)
2.5
11.8
74 bps
102.6

Key financials
| Crore

FY15

FY16P

FY17E

FY18E

Net Sales
EBITDA
Net Profit
EPS (|)

1,648
139
41.4
4.7

1,667
131
36.8
4.2

1,903
157
45.6
5.2

2,181
186
55.7
6.3

P/E (x)
Target P/E (x)

FY15
25.3
31.5

FY16P
28.6
35.6

FY17E
23.1
28.8

FY18E
18.9
23.6

EV/EBITDA (x)
P / BV (x)
RONW (%)
ROCE (%)

10.5
1.9
6.3
11.2

11.4
1.9
6.6
11.6

9.2
1.8
7.8
13.4

7.5
1.6
9.0
15.2

Valuation summary

Stock data
Particular
Market Capitalization (| Crore)
Total Debt (FY16) (| Crore)
Cash (FY16) (| Crore)
EV (| Crore)
52 week H/L
Equity Capital (| Crore)
Face Value (|)

| 120

Amount
1,047.2
472.7
59.9
1,460.0
298 / 98
17.5
2.0

Peer Comparison
1M

3M

6M

12M

Patel Integrated

12.8

5.2

14.0

(5.0)

Blue Dart Exp.

Gati

(5.1)

(2.9)

(23.5)

1.8

9.0

5.9

(19.4)

(40.5)

Transport Corp.

(2.2)

15.9

(8.3)

7.9

Research Analyst
Bharat Chhoda
bharat.chhodal@icicisecurities.com
Ankit Panchmatia
ankit.panchmatia@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Q4FY16 revenue was in line with our expectations but profitability was
above our estimates. Revenues grew 3% YoY (+3% QoQ) to | 428
crore (I-direct estimate: | 430 crore). Revenue from KWE grew mere
1% YoY to | 287 crore. However, standalone revenues grew 11% YoY
to | 127 crore, on the back of growth in e-commerce business. For
FY16, consolidated revenues grew 1% YoY to | 1667 crore
EBITDA for the quarter grew 11% YoY (+12% QoQ) to | 37.8 crore (Idirect estimate: | 35.7 crore). The resultant EBITDA margins expanded
64 bps YoY (+74 bps QoQ) to 8.8%. For FY16, EBITDA de-grew 6%
YoY to | 131 crore with an margin of 7.8%
Higher other income and lower interest expense accelerated PAT
growth, which was at the highest quarterly levels in FY16. PAT after
minority interest sequentially doubled (+37% YoY) to | 15.5 crore. In
contrast, for FY16 lower operating performance coupled with higher
depreciation led to PAT de-growth of 11% YoY to | 36.8 crore
KWE - Subdued year; standalone continues to bloom
Consolidated revenues for Gati during the year were adversely impacted
by the subdued performance in its KWE division. KWE that contributes
~70% to consolidated revenues was mainly impacted by absence of rail
service revenues. The approximate annual loss of rail revenues was to the
extent of | 35 crore. The company resumed and upgraded its MumbaiKolkata-Guwahati rail service with an addition of a round-trip that would
lead to recovery of revenues in FY17. Standalone revenues continued
their upward trajectory, with e-commerce revenues now contributing
12% of consolidated revenues vis--vis 8% in the earlier year. The current
quarterly run-rate for e-commerce has increased to | 63 crore compared
to | 53 crore in the earlier quarter. Gati is consolidating its fleet size and
pin codes served to achieve better efficiencies. Further, the company has
intentionally changed its strategy to focus on parcels weighing less than 2
kg, compared to earlier focus on carrying bulkier parcels. With these
efforts, we expect margin trajectory to improve to 8.5%, going ahead.
Pan-India network, multimodal capability - answer to start ups
Gatis wide range of services ranging from freight forwarding,
warehousing, packaging, last mile delivery to reverse logistics caters to a
360 presence in supply chain for customer requirements. Unlike Gati, the
recent start-ups (fuelled by higher funding) that specialise in specific
product or region would be unable to provide the reach and cost
efficiencies. Gati with its fleet size of 4,500 (owned and contracted), 200
reefer trucks and 76 warehouses (including two e-fulfilment centre) is at a
vantage point. With its multi-modal and multi-service expertise Gati
positions itself as the most favoured player for contract logistics.
GST a matter of time, sector still plagued by unorganised players
The Indian logistics industry is highly fragmented with 67% of vehicle
owners having fleets of less than five vehicles. Of the total express market
is estimated at | 17500 crore with an unorganised share of ~50%. With a
direct correlation to GDP and trade growth, an expected improvement in
the same would buoy revenue growth for logistic players. Goods &
Service Tax (GST) delay has sentimentally impacted the stock
performance. However, hope hinges on attaining the consensus. Gati
being one of the largest organised surface logistics players will benefit
from these changes. In our two phase DCF model we expect revenue to
grow at a CAGR of 18% in 2015-20E and 12% CAGR in 2020-25. We
continue to maintain BUY recommendation on the stock.

Variance analysis
| Crore
Revenue

Q4FY16 Q4FY16E
428.0
430.1

Q4FY15
415.9

YoY (%)
2.9

Q3FY16 QoQ (%)

417.8
2.5

Comments
Revenues continued to get impacted by loss of rail revenues. KWE earnings
continue to remain subded, however standalone revenues continue to grow

Cost of Sales

54.6

59.8

53.7

1.6

52.6

3.7

255.5

258.1

246.9

3.5

250.6

1.9

Employee Benefit Expenses

43.3

42.1

43.1

0.6

45.6

-5.1

Other Expenditure

36.8

34.4

38.2

-3.5

35.1

5.0

390.2

394.4

381.8

2.2

383.9

1.6

37.9

35.7

34.1

10.9

33.9

11.8

8.8

8.3

8.2

64 bps

8.1

74 bps

Operating Expenses

Total Expense
EBITDA
EBITDA Margin (%)
Depreciation

9.8

10.2

9.1

7.9

9.8

0.6

Interest

9.0

11.4

11.2

-20.1

11.0

-18.4

Other Income
PBT

5.2

4.0

4.4

18.7

2.7

95.1

24.3

18.1

18.2

33.4

15.8

53.9

Total Tax

4.3

4.5

3.2

34.1

4.7

-9.6

15.5

9.8

11.3

37.0

7.7

102.6

Q4FY16
127

Q4FY15
114

YoY (%)
11.3

287

285

0.7

287

12

13

-7.7

11

Adj PAT (excl. Minority Int)

Key Metrics
Standalone
KWE
Kausar
Ship

Q3FY16 QoQ (%)

120
6.4

NA

Increase on account of higher investments in network expansion

Margins expanded on the back of controlled opex and discontinuance of

lower margin routes

Higher other income fuelled the PAT growth

Though fuel sales de-grew by 2%; standalone revenues continue to grow due
to outperformance in E-commerce business

-0.1
7.1

Source: Company, ICICIdirect.com Research

Change in estimates
FY17E
(| Crore)
Revenue
EBITDA
EBITDA Margin (%)
PAT
EPS (|)

FY18E

FY16
Old
New % Change
Old
New % Change
Comments
1,667.0 1,903.0 1,903.0
0.0 2,180.6 2,180.6
0.0 Revenues estimations remain unchanged
130.8

151.5

156.7

3.5

176.4

185.8

7.8

8.0

8.2

28 bps

8.1

8.5

36.8

41.8

45.6

9.0

51.5

55.7

4.2

4.8

5.2

8.3

5.9

6.3

5.3
43 bps Margins expected to expand on the back of discontinuance of low margin routes
8.1
7.6 Improved operating performance to impact the PAT estimations

Source: Company, ICICIdirect.com Research

Assumptions
Current
Revenue Growth (%)
Present Value FCFE
Cost of Equity

Earlier

Phase 1
15.6

Phase 2
12.4

Phase 1
12.5

Phase 2
12.4

712.5

349.7

737.0

312.1

14.6

13.0

14.6

12.7

Comments
Maintained growth estimates with roll over of a year with a CAGR of
15.6% over 2016-2020 as compared to earlier 2015-2020
FCFE value Phase 1 (FY15-20) & Phase 2 (FY20-25)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

Company Analysis
Exhibit 1: Logistics cost as percentage of GDP
China

18
11

Japan
Europe

10
9

US

13

India
0

10

15

20

Logistics story of India - Pegged at 1.5x of GDP growth

The Indian logistics industry has grown at a CAGR of ~16% over the last
five years. The industry can be largely segregated into various modes like
road, rail, air and water. Owing to the number of players and advantages
of last mile delivery, roads contribute ~60% of industry volumes. Further,
express logistics alone is estimated to have a market share of | 17400
crore. The industry is highly fragmented, with ~53% unorganised market
that comprises small and mid-sized players dispersed across multiple
geographies offering various form of services. This fragmentation brings
in opportunities for organised players like Gati that has the reach and
ability to provide an array of services across sectors.
Exhibit 2: Emerging markets logistics index for countries with GDP more than US$300bn
Rank

Source: KPMG, ICICIdirect.com Research

Indian is considered to be in top five economies in the
emerging markets in logistics index based on size,
business conditions and attractiveness. Streamlining of
operations, higher investments in infrastructure will ignite
growth in the logistics industry.

Size and Growth

Compatibility

Connectedness

1 China

9.80

6.71

6.75

8.09

2 Saudi Arabia

7.21

6.65

6.29

6.76

3 Brazil

8.48

6.06

4.93

6.71

4 Indonesia

8.94

4.95

4.94

6.70

5 India

9.24

4.51

4.68

6.66

6 UAE

4.80

8.80

7.69

6.63

Country

Total Index

7 Russia

7.62

6.16

5.53

6.57

8 Malaysia

5.93

6.47

6.82

6.36
6.30

9 Mexico

7.89

4.63

5.28

10 Turkey

6.99

5.38

5.30

6.06

11 Chile

5.39

6.50

6.28

5.93

12 Qatar

4.88

8.04

5.90

5.87

13 Oman

4.14

7.63

6.54

5.70

14 Thailand

6.39

4.58

5.15

5.58

15 South Africa

5.52

4.99

5.64

5.46

Source: Transport Intelligence, ICICIdirect.com Research Source: UB presentation, ICICIdirect.com Research

Express industry shift from unorganised to organised

Currently, more than 50% of the | 17500 crore express market is with the
unorganised market, which makes it favourable for organised and
recognised players like Gati, to increase their penetration in the same. The
industry is highly fragmented with ~2500 players but very few integrated
players. In the organised segment, the postal department together with
large players constitute the organised portion of the market. While the
Indian postal department has the lions share in the document segment,
other organised players distinctively command a significant market share
in non-document market. Major domestic players in the organised
segments like Gati, BlueDart, DTDC, First Flight, etc, in collaboration with
global majors like KWE, DHL, FedEx, TNT and UPS constitute the
organised express industry in India.

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 3: Players and their capabilities in Indian market

35000

33739

30000
25000

21000

20000

17000

15000
10000

8109

10000

7500
3900

5000

5500

6700

879

0
BlueDart

Gati

Domestic locations

Fedex India

Work force

DTDC

First Flight

Source: Industry, ICICIdirect.com Research

Gati to maintain its market leadership in surface express

Gati continues to maintain its market leadership in the express
distribution industry. The express distribution market is currently valued
at | 17,50,000 crore, which is further broadly distributed among
documents and non-documents segments. Gati remains the market
leader in the non documents market with ~19% market share. It creates a
moat around its business model by providing one stop solutions for all
logistic requirements from warehousing, freight forwarding, supply chain
solutions, temperature controlled solutions, B2C couriers and fulfilment
centres. Having coverage of over 21000 pin codes and 653 districts, the
company claims a reach of 99.3% of the Indian geography. The express
distribution derives ~79% of the revenues from surface movement. In the
sector per se, the former parents (TCI) association with majority of auto
OEMs resulted in majority of revenues for the company. However, over a
period of time with higher market penetration this dependence was derisked followed by a diversified current customer profile.
Exhibit 4: Mode of transport contribution

Exhibit 5: Industry wise contribution

3%
13%

10%
37%

8%

15%

11%

79%

Surface

Rail

Air

5%

Others

Pharma
Textiles

8%

IT Hardware
FMCG

11%
Auto ancillary
Others

Engineering
d

Source: Company, ICICIdirect.com, Research

Source: Company, ICICIdirect.com, Research

Gati caters to the logistics requirements of eight of the top 10 auto

companies (Ford, Tata, Hero, Suzuki, etc.), top seven of electronic
companies (Samsung, Canon, Ricoh, etc.), five of the top seven
pharmaceutical companies (Cipla, Novartis, Torrent, etc.) and three of the
top five FMCG companies (HUL, Dabur, Godrej, etc.). Through surface
logistics, the company also carries out transportation of temperature
controlled products. With the company catering to the needs of
diversified industries the companys growth rate can be associated with
the performance of these industries, which further extrapolate to the GDP
growth rate. Gati derives 75% of its business from institution clients and
the remaining 25% from the retail segment. It provides a credit period of

ICICI Securities Ltd | Retail Equity Research

Page 4

~60 days to institutional clients. These agreements includes Diesel

surcharge clause. The clause benchmarks Diesel price hike index
wherein the billing is adjusted with a variation in the same and thus
customers pay the additional cost calculated by the specified Diesel
price hike index As the majority of the business flows from institutions
with whom Gati has formal agreements, it provides enhanced revenue
visibility and lower tonnage volatility.
Pan India network & multimodal capabilities to place Gati at vantage point
Gatis wide range of services panning through freight forwarding,
warehousing, packaging, last mile delivery and reverse logistics caters to
a 360 presence in Supply chain for customer requirements. We believe
that these supply chain activities if managed by a single player across the
supply chain tends to bring in value proposition in terms of cost efficiency
and superior quality. We expect Gati to be the market leader in contract
logistics, as it has capabilities in warehousing, managed transport and
value added service all along the supply chain in variety of industries.
Gatis multi-modal and multi-service expertise positions it as the most
favoured player for Contract Logistics. Gati currently operates a fleet size
of ~4500, 200 reefer trucks through 76 warehouses. The current asset
base is managed by Gati KWE, which commands a market share of 80%
and 50% in greater than 10 kg and 5-10 kg weight segment, respectively.
It also has ~15% market share in air logistics, which is managed by an
assured space across multiple air carriers. We consider the network to be
next best after Blue Dart as the latter also has appreciable market share.
Exhibit 6: Organised air express market share

Exhibit 7: Organised ground express market share

20%

13%

20%
46%

9%

27%

15%

11%

25%

15%

Blue Dart

Competitor 1

Competitor 2

Competitor 3

Blue Dart

Others

Source: Company, ICICIdirect.com, Research

Competitor 1

Competitor 3

Competitor 4

Others

Source: Company, ICICIdirect.com, Research

Exhibit 8: Multi modal & Multi-service offerings of Gati

Company Name

Transportation
Road

Air

Services

Rail

Water

Gati Limited

Yes

Yes

Blue Dart

Yes

Yes

TCI

Yes

Yes

Snowman

Yes

Cold Chain Express

-

Yes

Yes

Yes

Yes

3PL

Yes

Yes

Yes

Yes

Yes

Yes
-

Source: Industry, ICICIdirect.com Research

On the back of widespread network managed by multi-modal capabilities

and leadership in surface and incremental revenues from ramp up of
volumes at e-fulfilment centres we expect Gati KWE revenues to grow at
a CAGR of 17% in 2015E-20E. However, the same has moderated to 10%
CAGR over 2020E-25E.

ICICI Securities Ltd | Retail Equity Research

Page 5

Gati e-connect revenues to taper down, going ahead

Over the past two years, Gati e-commerce revenues, E-connect have
grown at a CAGR of 140%. The segment revenue now contributes
approximately 19% to the standalone revenue as compared to 13% a
year ago. With 500 two wheelers and about 320 four wheelers, and reach
to 20000 pin codes, Gati claims to be one of the top 5 e-commerce
logistics service provider in India. The company has scaled up its delivery
capacity to 72000 packages per month in Q3FY16 as compared to 37000
packages in FY15. Apart from last mile delivery, it also provides efulfilment services to e-commerce companies. The company has
consolidated its warehousing units, by closing two warehouses at Delhi
and consolidating the same with a large one. Further, it also has
warehouses at Hyderabad and Mumbai with a total handling capacity of
25000 packages per day. Two additional centres at Chennai & Jaipur are
planned which totals to 1.8 mn sq ft. These fulfilment centres specially
caters to e-commerce players warehouse outsourcing requirements.
Keeping these investments on track the company was candid to accept
that the earlier assumed growth of a triple digit in the segment would be
difficult to achieve, however, higher double digit growth is still
manageable. The tapering discounting available from e-commerce
companies would impact volumes. Following the same, we have reduced
our earlier estimations for e-commerce segment, which has a negative
impact on expected revenues, and thus on the valuations.

ICICI Securities Ltd | Retail Equity Research

Page 6

Goods and Services Tax (GST) Impetus for organised players like Gati
Indian logistics industry is plagued by multiple levels of state and central
taxes. The product is prone double taxation as the taxes already paid on
inputs are not adjusted on the calculation of taxes on the final product.
Further complications are in the form of interstate transactions which are
taxed separately, for which no input tax credit is available. Thus,
introduction of GST remains a much awaited reform which will simplify
these complications and would benefit consumers, produces, and the
Government. More than 140 markets have implemented GST in some or
the other form. With numerous benefits at both firm/consumer and
economy level GST is expected to add over 1% to the Gross Domestic
Product (GDP).
Implementation of GST will lead to a simplified tax structure with a
majority of taxes pooled under one uniform rate, thereby bringing more
efficient tax administration and reduction tax seepages. Due to multiple
taxation firms had resorted in setting up multiple warehouses in different
states. This was adding up to the firms costs, as they were unable to take
advantage of economies of scale from using larger but fewer warehouses.
Implementation of GST will overhaul and compress the entire
transportation setup. It is estimated that under the GST system, tax will be
levied on stock transfers and full credit will be given on inter-state
transactions. The outcome of the same will enable the manufacturer to
plan the warehousing and decisions on the basis of operational and
logistics efficiency. The current supply chain arrangements would be
realigned making certain proximity to manufacturing locale or
consumption markets, resulting into diverse hub and spoke models. Post
GST the demand for warehousing is expected to grow at an annual rate of
9% from current 918 mn sq.ft to 1440 mn sq.ft.
Gati with its widespread reach and warehousing capabilities is well
positioned to seize these opportunities. Implementation of GST will lead
to consolidation of widely spread warehouses, on the contrary free
movement of goods and services would necessitate tightened logistics
networks. Gati provides integrated and seamless transportation and
routing of goods through its reach of ~21000 pin codes, 16 major hubs
and 50 additional warehouses stretched across multiple locations.

Exhibit 9: Industry-wise cold storage industry

120
100

12

20

92

88

80

80
60
40
20
0
FY12

FY16
Un-organised

FY20
Organised

Source: KPMG, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Gati Kausar Prolonged growth strategy

The Indian retail industry is expected to grow at nearly 13% CAGR to
|864000 crore by 2021. Further, the Food & Grocery segment forms
nearly 60% on the retail industry and is expected to grow at nearly 1415% which is expected to fuel the demand for the cold chain and
temperature controlled logistics. As the organised retail industry in India
has low penetration (~8% of the total market), it provides significant
scope for the organised players to increase their penetration as well as
share in the retail industry. Moreover, the Indian food processing industry
with the total size of |750000 crore is witnessing healthy growth and is
expected to grow at ~17% over the next two to three years due to the
change in lifestyle and growing nuclear families. Cold chain industry in
India is nearly Rs.12000 to Rs.15000 crore and is anticipated to grow at a
CAGR of ~15-17% over the next three-five years led by growth in the
organized retail segment and maturation of Indian food processing
industry. With less than 10% of perishable produces utilizing the
temperature controlled facility, India, falls under the category of low cold
chain adaptation countries thereby providing tremendous scope for
growth in the segment. In terms of volume, the cold chain industry in
India estimated at around 30 million tonnes of warehousing capacity and
nearly 7000-8000 reefer vehicles. With a mere 7% of the organized
segment in cold chain warehousing and ~15% in temperature controlled

Page 7

transportation, the growth in the segment is well supported by overall

market growth of 15% and 20% growth in the temperature controlled
services. Gati Kausar is currently into cold storage trucking business
through its current fleet size of ~200 refrigerated trucks. It caters to
variety of industries across Quick Service Restaurants (QSRs),
Pharmaceuticals, Retail and Agri-food sectors. In Q2FY15, Gati Kausar has
raised |150 crore from Mandala Capital Ltd. which was structured as |30
crore is in equity and remaining |120 crore in debt. Leveraging on the
demand from the current trucking clientage, Gati Kausar plans to set up
10 cold storage warehouses, comprising a capacity of ~43000 pallets, for
which the land parcels and initial outlay is designed. We expect the
revenues to start contributing from Q4FY16.
Incremental addition of reefer trucks and warehousing capabilities will
provide supplementary revenues to Gati Kausar, following which we
expect Gati Kausar revenues to grow 40% over 2015E-2020E, with
moderation to 16% CAGR over 2020E-2025E.

ICICI Securities Ltd | Retail Equity Research

Page 8

Valuation
The logistics industry in India grew at a CAGR of ~17% over 2009-14 and
the growth is further pegged at 1.2x of the GDP growth rate. Gatis
standalone revenues grew at 6% CQGR over 10 quarters, primarily due to
increase in E-commerce revenues from | 8 crore to | 63 crore. Gati with
its leading market share of ~26%, widespread reach across Indian
geographies, one-stop logistics service provider with parent (KWE)
support, is expected to further expand its market share from the high
unorganized market in the industry. The theme around e-tailing, cold
chain and implementation of GST would accrue in a phased manner and
could result a multiplier effect on the sectors fundamentals, thereby
providing multiple re-rating. As the advantages will be in a phased
manner, we have employed the two phase free cash flow to the firm
(FCFF) model over FY16-25E for our discounted cash flow methodology.
We believe Gati will undergo these two phases of transformation, which
will transform the company to a matured player in the supply chain
mechanism. The first phase will be the high growth phase over FY16-20E,
where revenues will grow at a CAGR of 16% mainly due to higher
volumes from e-tailing segment, additional revenues generated from
fulfilment services and cold chain warehousing and improvement in
realization on back of value added services. Higher utilization levels and
better infrastructure management will bring in improvement in return
ratios, thereby improving the cash flow generation. In the next phase, we
have built in stable growth period (FY20E-25E), wherein we believe the
company will achieve a normalised growth rate of ~12% CAGR.
Thereafter, it will grow at a terminal growth rate of ~4%. Finally, with a
risk free rate of 7.5% and beta of 0.95 together with a market risk
premium of 7.5% we arrive at a cost of equity of 13.2%. For FCFF
valuation, we have assumed a post tax WACC of 13%. With the back of
the envelope calculation, we arrive at a target price of |150 and
recommend BUY.
Exhibit 10: DCF valuation
Valuation
PV of High growth period
PV of Stable growth period
PV of Terminal value
Less: Debt
Add: Cash & Investment
Targeted Market Capitalization
No. of shares
Target Price (|)

| Cr
711.0
344.79
615.1
(489.09)
124.62
1,306.37
8.73
150

Source: Company, ICICIdirect.com Research

Exhibit 11: Sensitivity to DCF Valuation

Terminal
Growth
Rate

149.7
2%
3%
4%
5%
6%

11.0%
142.2
149.0
157.3
167.8
181.5

WACC
12.0%
138.4
145.2
153.5
164.1
177.7

13.0%
134.9
141.7
150.0
160.5
174.2

14.0%
131.6
138.4
146.8
157.3
170.9

15.0%
128.6
135.4
143.7
154.2
167.9

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

Company snapshot
500
450
400
350
300
250
Target Price |150

200
150
100
50

Apr-17

Jan-17

Oct-16

Jul-16

Apr-16

Jan-16

Oct-15

Jul-15

Apr-15

Jan-15

Oct-14

Jul-14

Apr-14

Jan-14

Oct-13

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Dec-11

Event
Issues FCCBs for proceeds amount of $22.18 million

Feb-12

Kintetsu World Express (KWE) acquires Gati's EDSC Business

Feb-12

Sells partial stake in Gati Ship to Bernhard Schulte GmbH & Co KG

May-13

Sells complete stake in Gati Ship to Riba Constructions Pvt Ltd

Sep-13

Starts reporting e-commerce revenues with | 4 crore quarterly run rate

Oct-14

Sale of minority stake in Gati Kausar to Mandala Capital; stock hits 52-week high

Dec-14

E-commerce revenues grow 79% QoQ to |42 crore

Jul-15

Repots Q1FY16 results with 5% growth in revenues & E-commerce revenues at | 45 crore

Oct-15

Reports Q2FY16 results lower than estimates. Standalone grew 16% YoY

Jan-16

Reports Q3FY16 results with 1% de-growth in revenues, E-commerce revenues at | 53 crore. Margins at 8.1%

Apr-16

Reports Q4FY16 results higher than estimates. FY16 revenue grew by 1%; Standalone grew 12% YoY

Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Shareholding Pattern

Name
TCI Finance Ltd
Neera & Childrens Trust
Macquarie Investment Management Ltd.
Agarwal (Mahendra Kumar) HUF
Kintetsu World Express Inc
Manish Agarwal Benefit Trust
Agarwal (Mahendra Kumar)
Dhruv Agarwal Benefit Trust
Mahendra Investment Advisors Pvt. Ltd.
Parikh (Amal Niranjan)

Latest Filing Date

31-Dec-15
31-Dec-15
31-Dec-15
31-Dec-15
31-Dec-15
31-Dec-15
31-Dec-15
31-Dec-15
31-Dec-15
31-Dec-15

% O/S Position (m) Change (m)

0.09
8.1
0.0
0.06
5.6
0.0
0.06
5.0
0.0
0.05
4.3
0.0
0.05
4.3
0.0
0.05
4.1
0.0
0.04
3.8
0.0
0.04
3.8
0.0
0.04
3.7
0.0
0.03
2.3
0.0

(in %)
Promoter
FII
DII
Others

Mar-15
41.3
9.8
0.5
48.4

Jun-15
41.3
8.5
0.3
49.9

Sep-15
41.4
9.3
0.3
49.0

Dec-15
41.4
11.1
5.4
42.2

Mar-16
41.0
8.3
5.3
45.4

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
Dimensional Fund Advisors, L.P.
Raju (Satyanarayana V)

Value
0.51
0.07

Sells
Shares Investor name
0.30 Damani (Gopalkishan S)
0.04 FIL Investment Management (Hong Kong) Limited
Emerging Global Advisors, LLC
TCI Finance Ltd
Van Eck Associates Corporation

Value
-1.71
-0.11
-0.09
-0.07
-0.01

Shares
-0.69
-0.07
-0.05
-0.03
-0.01

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 10

Financial summary
Profit and loss statement
(Year-end March)
Revenue
Growth (%)
Cost of Sales
Employee Costs
Operating Expenses
Op. Expenditure
EBITDA
Growth (%)
Depreciation
EBIT
Interest
Other Income
PBT
Growth (%)
Tax
Reported PAT
Exceptional Items
Minority Interest
Reported PAT (adjusted MI)
Growth (%)
EPS

| Crore
FY 15
1,648.1
47.6
233.6
156.5
979.7
138.9
139.4
65.8
33.2
106.3
41.9
14.6
78.9
96.5
19.2
59.7
(3.0)
(15.3)
41.4
76.8
4.7

FY 18E
2,180.6
14.6
316.2
229.0
1,238.6
211.0
185.8
18.5
48.6
137.2
48.7
17.6
106.0
30.8
31.8
74.2
(18.6)
55.7
22.1
6.3

Cash flow statement

| Crore

FY 16P
1,667.0
1.1
216.3
179.7
996.0
144.2
130.8
(6.2)
38.3
92.5
42.5
14.8
64.8
(17.9)
15.6
49.2
(12.4)
36.8
(11.1)
4.2

FY 17E
1,903.0
14.2
270.2
204.4
1,089.4
182.2
156.7
19.8
44.3
112.5
48.0
16.5
81.0
25.0
20.3
60.8
(15.2)
45.6
23.8
5.2

FY 15

FY 16P

FY 17E

FY 18E

(Year-end March)
Per share data (|)

FY 15

FY 16P

FY 17E

FY 18E

17.5
531.2
548.6
286.3
186.4
472.7
7.4
80.4
1109.1

17.5
546.0
563.5
290.3
198.8
489.1
9.7
88.7
1151.0

17.5
581.3
598.8
275.8
218.7
494.5
9.7
90.5
1193.4

17.5
626.6
644.2
262.0
240.5
502.5
9.7
92.3
1248.7

62.9
4.7
8.5
0.8

64.3
4.2
8.6
1.0

68.3
5.2
10.2
1.0

73.5
6.3
11.9
1.0

380.2
86.5
293.7
2.7
296.5
446.9
64.7
3.5
266.9
59.9
203.7
534.0
80.8
48.1
104.1
232.9
301.0
1,109.1

437.2
124.8
312.4
25.0
337.4
446.9
64.7
5.2
291.2
45.4
260.0
601.8
85.0
53.6
136.2
274.8
327.0
1,176.0

507.2
169.1
338.1
50.0
388.1
446.9
67.9
5.2
286.7
105.4
262.6
659.9
129.6
61.6
178.2
369.4
290.5
1,193.4

557.2
217.7
339.5
50.0
389.5
446.9
71.3
6.0
328.6
156.7
265.2
756.4
151.6
67.8
196.1
415.4
341.0
1,248.7

Book Value
EPS
Cash EPS
DPS
Profitability & Operating Ratios
EBITDA Margin (%)
PAT Margin (%)
Fixed Asset Turnover (x)
Inventory Turnover (Days)
Debtor (Days)
Current Liabilities (Days)
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
PE
Price to Book Value
EV/EBITDA
EV/Sales
Leverage & Solvency Ratios
Debt to equity (x)
Interest Coverage (x)
Debt to EBITDA (x)
Current Ratio
Quick ratio

8.5
2.5
1.5
1.7
56.3
120.4

7.8
2.2
1.4
0.9
61.1
139.9

8.2
2.4
1.6
1.0
55.0
175.0

8.5
2.6
1.7
1.0
55.0
175.0

6.3
11.2
10.0

6.6
11.6
8.7

7.8
13.4
9.9

9.0
15.2
10.7

25.3
1.9
10.5
0.9

28.6
1.9
11.4
0.9

23.1
1.8
9.2
0.8

18.9
1.6
7.5
0.6

0.9
4.1
3.4
2.3
2.3

0.9
4.0
3.7
2.2
2.2

0.8
4.2
3.2
1.8
1.8

0.8
4.8
2.7
1.8
1.8

(Year-end March)
Profit after Tax
Less: Dividend Paid
Add: Depreciation
Add: Others
Cash Profit
Increase/(Decrease) in CL
(Increase)/Decrease in CA
CF from Operating Activities
(Add) / Dec in Fixed Assets
Goodwill
(Inc)/Dec in Investments
CF from Investing Activities
Inc/(Dec) in Loan Funds
Inc/(Dec) in Sh. Cap. & Res.
Others
CF from financing activities
Change in cash Eq.
Op. Cash and cash Eq.
Cl. Cash and cash Eq.

FY 15
56.8
10.8
33.2
79.2
32.6
152.7
259.9
88.4
0.0
(9.9)
78.5
(7.5)
(301.3)
(308.8)
29.7
30.3
59.9

FY 16P
49.2
10.3
38.3
77.3
41.8
(82.3)
34.6
(54.2)
(54.2)
16.4
0.1
(11.4)
5.1
(14.5)
59.9
45.4

FY 17E
60.8
10.3
44.3
94.7
94.7
1.8
186.3
(120.0)
(3.2)
(123.2)
5.4
(8.5)
(3.1)
60.0
45.4
105.4

FY 18E
74.2
10.3
48.6
112.5
46.0
(45.2)
105.1
(50.0)
(3.4)
(53.4)
8.1
(8.5)
(0.4)
51.3
105.4
156.7

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March)
Source of Funds
Equity Capital
Reserves & Surplus
Shareholder's Fund
Secured Loan
Unsecured Loan
Total Loan Funds
Deferred Tax Liability
Minority Interest
Source of Funds
Application of Funds
Gross Block
Less: Acc. Depreciation
Net Block
Capital WIP
Total Fixed Assets
Goodwill
Investments
Inventories
Debtors
Cash
Loan & Advance, Other CA
Total Current assets
Creditors
Other Current Liabilities
Provisions
Total CL and Provisions
Net Working Capital
Miscellaneous expense
Application of Funds

| Crore

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Key ratios

Source: Company, ICICIdirect.com Research

Page 11

ICICIdirect.com coverage universe (Logistics)

CMP
M Cap
Sector / Company
(|)
TP(|) Rating (| Cr)
1,318 1,700
BUY 26,711
Container Corporation
270
280
BUY 1,778
Transport Corp (TRACOR)
5,750 7,300
BUY 14,636
BlueDart
120
150
BUY 1,047
Gati Ltd.
168
195
BUY 7,831
Gujarat Pipavav (GPPL)
396
500
BUY 1,106
Dredging Corp Ltd.
Source: Company, ICICIdirect.com Research

EPS (|)
P/E (x)
FY15 FY16E FY17E FY15 FY16E FY17E
53.7 46.4 56.8 23.5 28.4 23.2
10.8 12.6 14.0 21.5 19.2 16.4
53.5 81.2 92.6 112.1 70.8 62.1
4.7
4.2
5.2 25.3 28.6 23.1
8.0
5.1
6.3 19.1 33.1 26.7
22.3 22.5 32.6 17.8 17.6 12.1

ICICI Securities Ltd | Retail Equity Research

EV/EBITDA (x)
FY15 FY16E FY17E
17.0 18.9 15.0
10.6 11.7 10.0
64.3 35.9 30.3
10.5 11.4
9.2
14.3 19.3 14.7
11.1 10.8
9.3

RoCE (%)
FY15 FY16E FY17E
12.0 10.1 12.2
19.8 20.0 19.9
28.0 38.0 40.6
11.2 11.6 13.4
22.8 13.2 16.8
6.8
7.1
8.1

RoE (%)
FY15 FY16E FY17E
13.7 10.9 12.2
13.1 14.0 13.8
42.7 45.0 42.2
6.3
6.6
7.8
21.6 12.1 13.0
4.3
4.1
5.4

Page 12

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 13

ANALYST CERTIFICATION
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reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report.

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ICICI Securities Ltd | Retail Equity Research

Page 14