Accommodating for lower then expected profitability due to fuel price hike impact, start up costs of air freight business and expenses related to brand development we have revised our earning estimates for GATI.
We now expect the company to report revenues of Rs6.8 billion, EBIDTA margin of 7.2% and PAT of Rs258 million. This translates into lower EPS of Rs2.8 as against our earlier estimate of Rs3.1 for FY08E.
For FY09E, we now expect GATI to report revenues of Rs8.7 billion, EBIDTA margin of 8.6% and PAT of Rs451 million. This translates into lower EPS of Rs4.8 as against our earlier estimate of Rs6 for FY09E.
At Rs.80, the stock trades at 1.8x book value, 16.6x earnings and 11.9x cash earnings based on FY09E. We recommend BUY with revised price target of Rs120, which provides 50% upside potential form current levels.