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Focus on providing multimodal Logistics solutions to aid growth

* TRPC offers integrated Logistics solutions through its three business divisions: TCI Freight, TCI Supply Chain, and TCI Seaways. It also has a JV with CONCOR, where it provides rail transport solutions. Its presence across segments helped it cater to a larger market and provide customized valueadded solution services as against mere transportation or warehousing.

* It has a fleet of more than 12,000 trucks, six cargo ships, more than 150 reefer vehicles, and 13m sq. ft. of warehousing space.

* While the freight services business is likely to benefit from a shift to organized from the unorganized sector, the supply chain will see a strong recovery driven by an improvement in the Auto sector.

* The Seaways segment, which is the highest margin segment for TRPC, is expected to continue its growth momentum in FY23. It plans to add capacity in its Seaways division by FY23-end, which should aid volume growth.

Seaways business drives earnings growth; on track to add a new ship by the end of FY23

* TRPC saw robust demand for its freight services and is looking to increase the mix of its high-margin less than truck load share (LTL) in the overall freight mix to 40% by FY23-end from 35% at present.

* In the Supply Chain business, the company provides technology-driven inbound and outbound transportation, warehousing, and yard management solutions. An improvement in the Auto vertical is expected to drive growth.

*  The Seaways business witnessed strong upward momentum in FY22, along with the doubling of margin. The elevated margin in the Seaways business is likely to continue in the medium term.

* In FY22, TRPC divested 20% stake in its cold chain business to Mitsui & Co. for INR160m. It expects considerable growth from processed foods, QSR, and Pharmaceutical industries.

*  It has pared its debt level to sub-INR1b from ~INR4b about two years ago.

Integration of technology across business verticals has ensured better responsiveness, efficiency, and accuracy

* Constant focus on digital transformation and automation of processes has enabled TRPC to streamline its business operations across verticals and ensured better efficiency, accuracy, and effective supply-chain management.

* It has adopted IT-enabled infrastructure and database solutions like Cloud computing, database warehousing management system, and repository systems, which has enabled it to provide better client service, boost productivity, and strengthen its network.

*  TRPC has implemented an algorithm-based refueling system, which has aided in the reduction of fuel cost.

* The government’s vision of Gati Shakti, coupled with customer demand for contract Logistics and technology-driven value-added services, augurs well for the company in coming years.

Strong asset base supported by IT-enabled infrastructure; looking at growth focused capex

* TRPC has a fleet of more than 12,000 trucks, six cargo ships, over 150 reefer vehicles, and 13m sq. ft. of warehousing space under management.

* It plans to add capacity in its Seaways division by the end of FY23. ? The management is looking at a capex of INR2.5b in FY23, of which INR1-1.25b will be spent on acquiring ships and containers, INR300-500m on purchase of trucks, and INR750m will be utilized towards building warehouses.

Focus on ESG initiatives

* The management is focused on reducing its carbon footprint through an integrated multimodal Logistics approach and a gradual shift to rail and coastal multimodal solutions from road. ? Through its JV, TCI-CONCOR Multimodal Solutions and Transystem Logistics International Pvt., the company moved 0.11MT of cargo via multimodal trains, reducing the carbon footprint of ~38,000 trucks.

* In FY22, the TCI Group launched ‘Safe Safar’ to educate and create awareness among the Logistics community about health and road safety norms across more than 50 cities, covering over 20,000 drivers, and reaching ~1m people across India.

Valuation and view

* We continue to see TRPC as a long-term play, backed by: a) a diversified clientele, b) improving share in the LTL business in the Road Freight division, and c) elevated contribution from the high-margin Seaways segment.

* We expect TRPC to clock a revenue/PAT CAGR of ~18%/19% over FY22-24. The stock trades at 14x FY24E EPS. We maintain our Buy rating on the stock with a TP of INR860 (based on 17x FY24E EPS).

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