Buy Transport Corporation Ltd For Target Rs.462 - Yes Securities
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Result Highlights
* Transport Corporation 34.7% yoy growth in revenues to Rs.8.9 bn. The freight division revenues came in at Rs.4.8 bn, up by 32.0% yoy with EBIT margin at 4.0%. The supply chain solution reported revenues of Rs.3.0 bn (+42.0% yoy) with EBIT margin of 6.9%. The seaways division for the quarter reported revenue of Rs.1.3 bn (+24.4% yoy) with EBIT margin of 23.5%
* Overall the MSME sector did well during the quarter which helped improve volumes. The Company witnessed pent up demand post COVID recovery. TCI is witnessing robust pipeline of opportunities with strong connect made with customers during the pandemic.
* The company generated strong free cash flow in FY21 which it has used in working capital, significantly reducing working capital debt. The company has utilized only 32% of its available working capital debt limits.
* The Company is witnessing opportunities in the Cold chain segment and expect the segment to witness strong growth in next few years. While Freight rates have been rising, the Company has managed to pass on large part of the increase to customers.
Our view:
The company has witnessed a strong revival in demand in the last 2 quarters across all its 3 major business segments. This has helped it to make up for the loss of revenue in Q1 FY21 ending the year with 3.1% yoy growth. Q1 FY22 has again witnessed some challenges but the situation is not as severe as previous lockdown and is expected to normalize soon. The Company expects Freight division to perform well driven by expected pickup in activity and MSME sector.
The Supply chains segment is expected to grow as Auto production picks up and as TCI adds new customers. We have increased our estimates to factor in the strong performance and improved outlook. Currently, the stock is trading at a 10x FY24E EPS. We roll forward our estimates to FY24 and maintain our BUY rating on the stock for revised target price of Rs.462 (13x FY24E EPS). We expect TCI to benefit significantly from its multi‐modal logistics solutions.
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