For FY09 on a consolidated basis, GATI reported revenues of Rs7.9 billion up 10.3% on y-o-y basis, operating margin of 6.3%, down 50 bps and loss of Rs187 million as against PAT of Rs198 million in FY08.
PAT is impacted negatively due to loss of Rs169 million on maturity of derivative contracts and losses of the air freight business to the tune of Rs183 million.
The coast to coast shipping business recorded revenues of Rs935 million up 29.2% on y-o-y basis primarily due to addition of new ship (MV GATI Pride of 7000 DWT and 442 TEU capacity) in February 2009.
Net sales on a standalone basis for Q4FY09 were at Rs1.5 billion, down 1.1% y-o-y, and up 0.9% on sequential basis. The express distribution and supply chain division recorded revenues of Rs1.3 billion up 4.5% y-o-y and up 6.3% on sequential basis. The coast to coast shipping business recorded revenues of Rs224 million down 23.9% on y-o-y basis.
The company reported PAT of Rs14 million down 6.5% on y-o-y basis primarily due to increased depreciation and interest costs.
Outlook and valuation
Accommodating for better-than-expected revenues and operating margins and expected pick up in the Indian economy post September 2009 we have revised our earnings estimates.
For FY10E, we now expect GATI to report revenues of Rs8.5 billion (up 14%), EBIDTA margin of 9.6% (as against 8.5%) and PAT of Rs150 million (up 20.2%).
Accordingly we expect the company to report EPS of Rs1.8 and CEPS of Rs5.4 in FY10E as against our earlier estimates of Rs1.5 and Rs3.9 respectively.
We have valued GATI on DCF method of valuation with 12.9% WACC (13.5 earlier) and 4.0% terminal growth rate (3.0% earlier) to reflect the current scenario. Thus the price target is revised upwards to Rs50 as against Rs35 earlier.
At Rs.47, the stock trades at 1.4x P/BV, 26.6x P/E and 8.7x P/CEPS based on FY10E. Due to 6% upside potential we upgrade the stock from Sell to ACCUMULATE with revised price target of Rs50.