I believe the sales are somewhat tracking the number of branches. So according to management they have increased number of branches by 90% in 8 years and sales have grown by 70% percentage.
In the same period they have expanded their customer base by 70% which tells me that their average revenue per customer has remained flat which is part of the problem. It’s an industry wide phenomenon. Logistics is a very competitive sector with very limited pricing power for the existing players. Plus cost of operations has been edging up due to inflation (labor, transport etc).
So in such an industry, the ability of a company to deliver better returns to their shareholders will depend on market share expansion while reducing cost of delivery which will then flow into their operating margins and bottom line.
TCI Express management has continuously reiterated that they will be focused on both market share gain (through high quality services) and cost optimization (through automation). They are also exploring tactical opportunities for high margin businesses. Based on the results in the last 2 years, I am yet to see the upside from these actions but results haven’t been disappointing either. They have surely been outperforming many of their listed peers in the last few quarters of the sector slowdown.
I only wish that the management tempered their keenness to give guidance to the analysts which they can’t deliver on quarter after quarter.
All said, one thing I’m quite convinced on is that if there were any revival in the fortune of domestic logistics sector, TCI would be my top bet given their sound business model, healthy balance sheet and comfortable valuations.
Disc- Not invested but keenly tracking the stock and the sector for last 3-4 quarters.
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