Shares of logistics firm Gati have slumped over 16% in the past year, but analysts at Nuvama see the stock making a comeback.

The Gati Analyst: The Amit Agarwal-led analyst team at Nuvama maintained the “buy” rating for the stock but cut the price target from ₹234 to ₹222. The revised target still indicates an over 63% upside from the stock’s last closing price of ₹136.35.

The Gati Thesis: The analysts noted that in the September quarter, Gati experienced a 1.5% YoY growth in revenue, reaching ₹442 crore, driven by increased volumes. The surface express volumes surged by 17.7% year-on-year to a record 330,000 metric tons, the brokerage said that this reflects a robust end-user demand and a deliberate strategy to capture market share.

The analyst however also pointed out that the realization per kilogram fell by 10.2% YoY to ₹10.8/kg, influenced by adverse product and client mix, intense competition from unorganized players, and write-offs. The air express and supply chain segment also witnessed a YoY decline of 9.5% and 7.7% to ₹19 crore and ₹12 crore respectively.

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The company also reported a net loss of ₹4 crore, compared to a profit after tax of ₹8 crore YoY, primarily attributed to lower EBITDA and persistent depreciation and interest costs.

The brokerage stated that although the quarter ending September impacted profitability, the substantial volume growth suggests market share gains. According to the firm, they anticipate a recovery in gross margin as they expect the decline in realization to be accompanied by cost savings in the next two to three quarters.

The analysts said that they remain bullish on the stock as its Balance Sheet is healthy, with a nearly
net debt-free position, steady working capital, and healthy operating cash flows. The brokerage added that the price target revision was done to account for the near-term pressure on margins.

Price Action: Gati’s share price was up 0.26% to trade at ₹136.70 in early trade on Tuesday.

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