Note:Recommended to members a week back at 107.Quoting at 110 odd now.
Multibagger Business idea:-
Scripscan:Gati Ltd
Traded in:Nse-Bse
Cmp:107rs
Target:400rs
Duration:3-4 years
Return percentage:4x
CAGR return:40%
Quote:Sometimes you don't need to be a research bloke to get hold of big multibaggers.Think being a 16 year old or maybe someone who hardly understands any ratios or valuation metrics.Few such kinda points which will tell you why today's pick is one heck of a potential big multibagger.
Note:I don't quite prefer to recommend two stocks from the same sector but if something is expected to be hot,then playing with two-three growth stocks can provide a lot of returns.I did recommend TCI, which has been an instant success.As you all are aware it was given at 120 bucks and in no time it doubled just like that.TCI is a leader which is managed by people with conservative guidance.Gati on the other hand guides aggressively.At that time,TCI looked much cheaper than Gati in terms of valuations.Its the reverse now, gati has turned much cheaper to TCI.
About the company:Gati Limited is pioneer and leader in Express Distribution and Supply Chain Solutions in India delivers 5.2 million packages per month. Having started as a cargo management company in 1989, Gati has grown into an organization with more than 4,000 business partners and a network reach of 667 out of total 671 districts in India. Gati has over 4500 vehicles on the road excluding their fleet of refrigerated vehicles, container shipping vessels and world class warehousing facilities across India. Furthermore, Gati has a strong market presence in the Asia Pacific region and SAARC countries. Gati has offices in India, Singapore, Hong Kong, China, Nepal and Thailand.Now to know about its infrastructure,JVs,capability and efficiency or about its guidance,follow the investor's presentation:
https://www.Gati.com/images/pdf/Investors-Presentation-FinalV1.pdf
1)I am someone much fond of online shopping.Many a times bought stuff from the likes of snapdeal,flipkart,myntra,yepme,jovi and many more.This companies are growing at 200% annually maybe.But they are never bothered about profits.Its a classic greater fool theory where a fool buys only with the intention of selling to a greater fool at much profit.What is my interest then?Sounds irrelevant?Come on think about the logistic providers.The medium between the company and the buyer in a quintessence.There would be many more e-commerce firm which will come and go but they would ensure the logistics providers enjoy a super extravagant life atleast for the next decade or so.
2)Gati's e-commerce division did a revenue of 40crs in fy13-14.Company expects to grow by 100-125% for next few years.They have an aim of delivering 1200crs revenues from this division by 2020.For a reference,there's a supply chain company called 'Delhivery' which is about valued at 500crs.They probably did 140-150crs last fiscal.So if gati delivers 1200crs which shouldn't be a big deal considering the upcoming demand,that single segment itself gives a 3600-4000crs valuation to Gati, say 5 year forward.Gati's present marketcap is just 900crs.
3)I don't like greedy promoters during uncertain times but when times changes for good,I do fancy them.The reason is simple folks-They would do every possible things to make sure their stock price moves higher.The hints are infront of you.They have even managed to convince stalwarts like Radhakishan Damani,Ashish Kacholia etc.Those big names are holding a chunk of Gati.Imagine a listed company claiming "logistics will lead the next bull run' in their presentation.Well the sector certainly will-I echo their statement.
4)When Trade to trade segment is a trigger:TCI has moved to different orbit as punters are trading on it.Delivery stats are way too low for that company.If gati was in normal segment,its fate would have been same like TCI.So ones Gati gets moved to the normal settlement,same punters would fancy it and make it move higher.This is more of a psychological thing which the experienced can well fathom.In this case its rather of a big trigger.
5)The fast expanding e-commerce market in the county provides it with an opportunity to leverage on Gati-KWE back-end services(its Jv) and expand its reach.Exiting the shipping business will improve the profitability of the company.For a long time,investors avoided the sector for poor ratios.But with strong tailwinds and implementation of GST,they would look much better.Also as the Ecom division grows big,the operating leverage story will pan out too.Wont be surprised if it shows ROE of around 18-20 by fy20.
2013-14 numbers:In Q3FY’14, the Company’s consolidated net profit stood at Rs 13.8 crore as against Rs 7.5 crore in the corresponding quarter previous year.The total consolidated turnover stood at Rs 386.5 crore for Q3FY’14 compared to Rs 321.7 crore in the same period of last fiscal. In FY’14, the consolidated turnover of the company (9 months) stood at Rs. 1,127.1 crore and net profit was Rs 28.3 crore.
Company guidance:Its current debt stood at Rs 480 crore as of March 31, 2014.It expects debt to be contained under 500 Cr.Company has given a guidance of 1732crs of consolidated revenues for fy14-15 and further guided 2066crs of revenues for fy15-16.Ebitda for those two years guided remains 170crs and 214crs respectively.Pbt guided for 2015 and 16-100crs and 151crs respectively.PAT for fy16-17 should come over 100crs.Company has changed its year ending from July to April.So maybe one-two quarters adjustment to reach that figure mark.
Point to note:Gati within a couple of months at most will sell out the Gati ship division(as guided in the latest conference call).It made losses to the tune of 17crs.So without even doing anything,this 17crs would swing and inflate the last years number.That's over 60% a jump to last year reported net profits of 28crs.
How I arrived at 400rs:Company will grow its PAT at 35-40% CAGR for coming few years.The highly craved e-commerce division will grow at over 100% CAGR.So assimilating those and keeping a PEG of tad less than 1,helps me to arrive at the price target of 400 bucks.Sectoral tailwinds,implementation of GST will further rerate the stock.Company has guided an EPS of 10-11 for fy16.So quoting at par compared to over 15 times of TCI or Bluedart.Gati thus is one heck of a long term buy.
BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id [email protected] to know more about it.
Multibagger Business idea:-
Scripscan:Gati Ltd
Traded in:Nse-Bse
Cmp:107rs
Target:400rs
Duration:3-4 years
Return percentage:4x
CAGR return:40%
Quote:Sometimes you don't need to be a research bloke to get hold of big multibaggers.Think being a 16 year old or maybe someone who hardly understands any ratios or valuation metrics.Few such kinda points which will tell you why today's pick is one heck of a potential big multibagger.
Note:I don't quite prefer to recommend two stocks from the same sector but if something is expected to be hot,then playing with two-three growth stocks can provide a lot of returns.I did recommend TCI, which has been an instant success.As you all are aware it was given at 120 bucks and in no time it doubled just like that.TCI is a leader which is managed by people with conservative guidance.Gati on the other hand guides aggressively.At that time,TCI looked much cheaper than Gati in terms of valuations.Its the reverse now, gati has turned much cheaper to TCI.
About the company:Gati Limited is pioneer and leader in Express Distribution and Supply Chain Solutions in India delivers 5.2 million packages per month. Having started as a cargo management company in 1989, Gati has grown into an organization with more than 4,000 business partners and a network reach of 667 out of total 671 districts in India. Gati has over 4500 vehicles on the road excluding their fleet of refrigerated vehicles, container shipping vessels and world class warehousing facilities across India. Furthermore, Gati has a strong market presence in the Asia Pacific region and SAARC countries. Gati has offices in India, Singapore, Hong Kong, China, Nepal and Thailand.Now to know about its infrastructure,JVs,capability and efficiency or about its guidance,follow the investor's presentation:
https://www.Gati.com/images/pdf/Investors-Presentation-FinalV1.pdf
1)I am someone much fond of online shopping.Many a times bought stuff from the likes of snapdeal,flipkart,myntra,yepme,jovi and many more.This companies are growing at 200% annually maybe.But they are never bothered about profits.Its a classic greater fool theory where a fool buys only with the intention of selling to a greater fool at much profit.What is my interest then?Sounds irrelevant?Come on think about the logistic providers.The medium between the company and the buyer in a quintessence.There would be many more e-commerce firm which will come and go but they would ensure the logistics providers enjoy a super extravagant life atleast for the next decade or so.
2)Gati's e-commerce division did a revenue of 40crs in fy13-14.Company expects to grow by 100-125% for next few years.They have an aim of delivering 1200crs revenues from this division by 2020.For a reference,there's a supply chain company called 'Delhivery' which is about valued at 500crs.They probably did 140-150crs last fiscal.So if gati delivers 1200crs which shouldn't be a big deal considering the upcoming demand,that single segment itself gives a 3600-4000crs valuation to Gati, say 5 year forward.Gati's present marketcap is just 900crs.
3)I don't like greedy promoters during uncertain times but when times changes for good,I do fancy them.The reason is simple folks-They would do every possible things to make sure their stock price moves higher.The hints are infront of you.They have even managed to convince stalwarts like Radhakishan Damani,Ashish Kacholia etc.Those big names are holding a chunk of Gati.Imagine a listed company claiming "logistics will lead the next bull run' in their presentation.Well the sector certainly will-I echo their statement.
4)When Trade to trade segment is a trigger:TCI has moved to different orbit as punters are trading on it.Delivery stats are way too low for that company.If gati was in normal segment,its fate would have been same like TCI.So ones Gati gets moved to the normal settlement,same punters would fancy it and make it move higher.This is more of a psychological thing which the experienced can well fathom.In this case its rather of a big trigger.
5)The fast expanding e-commerce market in the county provides it with an opportunity to leverage on Gati-KWE back-end services(its Jv) and expand its reach.Exiting the shipping business will improve the profitability of the company.For a long time,investors avoided the sector for poor ratios.But with strong tailwinds and implementation of GST,they would look much better.Also as the Ecom division grows big,the operating leverage story will pan out too.Wont be surprised if it shows ROE of around 18-20 by fy20.
2013-14 numbers:In Q3FY’14, the Company’s consolidated net profit stood at Rs 13.8 crore as against Rs 7.5 crore in the corresponding quarter previous year.The total consolidated turnover stood at Rs 386.5 crore for Q3FY’14 compared to Rs 321.7 crore in the same period of last fiscal. In FY’14, the consolidated turnover of the company (9 months) stood at Rs. 1,127.1 crore and net profit was Rs 28.3 crore.
Company guidance:Its current debt stood at Rs 480 crore as of March 31, 2014.It expects debt to be contained under 500 Cr.Company has given a guidance of 1732crs of consolidated revenues for fy14-15 and further guided 2066crs of revenues for fy15-16.Ebitda for those two years guided remains 170crs and 214crs respectively.Pbt guided for 2015 and 16-100crs and 151crs respectively.PAT for fy16-17 should come over 100crs.Company has changed its year ending from July to April.So maybe one-two quarters adjustment to reach that figure mark.
Point to note:Gati within a couple of months at most will sell out the Gati ship division(as guided in the latest conference call).It made losses to the tune of 17crs.So without even doing anything,this 17crs would swing and inflate the last years number.That's over 60% a jump to last year reported net profits of 28crs.
How I arrived at 400rs:Company will grow its PAT at 35-40% CAGR for coming few years.The highly craved e-commerce division will grow at over 100% CAGR.So assimilating those and keeping a PEG of tad less than 1,helps me to arrive at the price target of 400 bucks.Sectoral tailwinds,implementation of GST will further rerate the stock.Company has guided an EPS of 10-11 for fy16.So quoting at par compared to over 15 times of TCI or Bluedart.Gati thus is one heck of a long term buy.
BTW:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id [email protected] to know more about it.
