Buy Gati - A C Choksi Share Brokers Pvt. Ltd.

CompanyOverview:

Gati Ltd is a pioneer and leader in the Express Distribution and Supply Chain Solutions in India. The company launched many path-breaking initiatives in the logistics segment. The business of the company is movement of the cargo from one place to another usingmultimodal transport models ie Road, Rail, Air&Sea. They also offers specialized logistics services.

InvestmentRationale:

JointVenture with KintetsuWorld Express(KWE)

In February 2012 Gati announced Joint Venture with Japan's KintetsuWorld Express (KWE), in which Gati holds 70% of the total stake. Purpose of this Joint Venture was to increase Gati's expertise in 3PL and express distribution in India with KWE's freight forwarding expertise and global customer base. Management expects healthy returns from this JV in upcoming Quarters.

Good Annual Results

Company showed healthy Profit after Tax of Rs. 41.51 cr. in FY12 as compared to Rs. 14.10 cr. in FY11 on back of good performance by EDSC and Fuel Sales segment. Profits of EDSC segment grew by 91.67% Y-o-Y to Rs. 183.54 cr. And profit of Fuel Sales segment grew by 52.66%Y-o-Y to Rs. 22.9 cr.

Reduction of Debt

Company has successfully resolved issues like FCCB redemption, High debt and loss making shipping business in last quarter with the help of capital of Rs. 267.7 crores Infused byKWEin the JV with Gati.

We expect Gati to perform well in upcoming quarters with opening up of synergies with theKWEJV. Thus we recommend on the stock for the Target price of Rs.51 in long term.

Source : Equity Bulls

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