TCI Express Ltd
Weak Q1; Focus on reverting to growth
TCI Express reported lower standalone revenue at Rs. 293 crore, down 3.9% y-o-y, owing to a 2% y-o-y decline in overall tonnage volumes to 2.35 lakh tonnes and a 1% decline in truck utilisation to 82%. Election period, weather conditions, challenges faced by SME customers hit revenues. Further, standalone OPM at 11.4% (down 377 bps y-o-y) surprised negatively (our estimate of 14.2%) owing to decline in overall volumes and utilisation rates (1% dip leads to 150 bps contraction in OPMs). Hence, standalone operating profit/net profit declined by 28% y-o-y/29% y-o-y to Rs. 33.5 crore/Rs. 23.1 crore (over 20% lower than estimate). The management would eye for double-digit revenue growth for FY2025 as July witness single-digit volume growth and H2FY2025 expected to be see healthy growth partly aided by low base. It expects OPMs to revert to over 14% in the near term with increase in utilization rates. It is strengthening its multi-modal capabilities by setting up a separate network for rail and air which would entail faster delivery. It would be automating Kolkata and Ahmedabad sorting centers over one and half years. Its planned capex of Rs. 500 crore over FY2023-FY2027 remains on track with the balance capex of Rs. 329 crore to be incurred during FY2025-FY2027.
Our Call
Valuation – Retain Buy with a revised PT of Rs. 1,350: TCI has been affected by a sluggish macro environment, although it has performed well vis-à-vis industry peers. The company remains on track to achieve profitable growth, although some volume gets sacrificed in the near term. We introduce our FY2027E earnings in this note. The continuous expansion by setting up new sorting centers and automation of existing centers, addition of branches, and scale up of new businesses would provide a 24% net earnings CAGR over FY2024-FY2027E. Further, TCI has a strong balance sheet, healthy cash flow-generation capacity, and high return ratios. We retain our BUY rating on the stock with a revised price target (PT) of Rs. 1,350, factoring in the downward revision in estimates and expecting a growth revival from H2FY2025.
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