IGI Logo

Highest ever margins lift profitability…

TCI Express (TCIEL) continued its strong QoQ momentum in topline (up 23%) and bottomline (up 43%) while it lagged in YoY revenue comparable (flat YoY). However, due to significant margin expansion, TCI Express posted healthy growth (up 32%) on the YoY profitability front. MoM the performance remained mixed as recovery during the month of October (led by festive season) saw contraction of core industries in November. EBITDA margins expanded 449 bps YoY (198 bps YoY) to 17.3% mainly due to cost control measures employed by the company, which is evident in lower employee, other expenses and higher gross margins. Subsequently, absolute EBITDA grew 32% YoY (39% QoQ) to | 45 crore. Buoyed by the strong operating performance, PAT grew 32% to | 34 crore (43% QoQ).

Revenue performance expected to strengthen, going ahead Mixed topline performance during the quarter was rescued by expansion on the margins front, as the management employed cost control measures and continued to pick up on profitable sales. While TCI Express continues to surprise us on the profitability front (at a time when, competitive intensity in the sector is high), revenues are expected to catch the momentum in the next few quarters (driven by new branch additions and expansion of existing client business). With 95% of revenue contribution coming from the B2B segment (majority from the MSME and SME sector), revival of SME, MSME sector remains key to TCI Express’ fortunes. It is expected to tide over the current volatility by continued automation, enhancing technological capabilities and reducing field footprints.

Capex spend remains on track

In 9MFY21, TCIEL incurred capex of | 41 crore. Capex was primarily for two new sorting centres at Gurgaon, Pune (to commence operations in Q4) and IT systems (has 28 sorting centres). The company also opened 10 new branches during the quarter (has 800+ offices pan-India). Overall, TCIEL has maintained a capex guidance of | 400 crore in five years (of which | 160 crore has already been spent in the last 3.75 years), which is lower than the expected run rate owing to a delay in getting regulatory approvals for expansion of planned sorting centres and current uncertain environment.

Valuation & Outlook

In spite of the hiccups in the near term (strong B2C performance positively impacted other players), the company’s focus on building its moat in the B2B segment, bodes well for continued profitable growth in the longer run. TCI Express has a diversified customer base across industry verticals. With the expansion of owned branches along Metro and tier 1 cities, this helps TCI Express in having control over user experience and providing value added services to clients. We value TCIEL at 33x P/E with a target price of | 1150 (earlier price | 900). We maintain our BUY recommendation.

To Read Complete Report & Disclaimer Click Here

For More ICICI Direct Disclaimer https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer