IGI Logo

Healthy performance...long term outlook intact

Transport Corporation of India Ltd. (TCI) is one of the largest integrated players in the organised logistics industry. Key business segments include freight, supply chain, warehousing solutions, & shipping services.

* Revenue grew by a healthy 10% YoY, which was above our expectations, led by freight and supply chain businesses, which reported healthy double-digit growth.

* EBITDA was flat YoY, and margins dipped by 90bps YoY to 10.1% on account of softness in the seaway business and higher fuel costs.

* Net profit grew by 25% YoY, led by higher profits from JV and other income.

* Looking forward, we anticipate stable volumes in freight, Ecommerce, and supply chain businesses, while seaway business is expected to improve gradually with the addition of a new ship.

* We expect PAT to grow at a 15% CAGR over FY24-26E, with stable margins of ~10.5%.

* We value TCI at a P/E of 18x on FY26E, given the healthy earnings outlook and return ratios; hence, we maintain an Accumulate rating on the stock with a target price of Rs.1081.

Double digit growth….FY25 outlook positive

In Q4FY24, TCI achieved a healthy 10% YoY revenue growth, fuelled by a 13% YoY increase in supply chain business driven by strong automotive sector volumes and the good traction of multimodal services. The trend of double-digit growth in supply chain divisions is expected to continue. Freight division revenue saw a healthy growth of 10% YoY, led by inventory build-up. The Seaway division saw a 2% YoY decline in revenue, attributable to falling freight rates and capacity overhangs. Recovery is anticipated to be gradual due to delayed ship additions and heightened competition. The company plans to add 2 ships in next 1-2 years. TCI's capex plans stand at Rs. 375cr. The long-term growth prospects for the sector remain strong, driven by strong economic growth, government infrastructure spending, and e-commerce penetration. Management has guided revenue and profit to grow by 10-15%. We anticipate TCI revenue to grow by 16% CAGR over FY24-FY26E.

Margins to remain at 10.5% over FY24-26E

In Q4FY24, TCI’s EBITDA remained flat YoY, primarily attributed to a reduced contribution from the seaways business and higher operating expenses. Consequently, margins witnessed a contraction of 90bps YoY, to 10.1%. However, Net profit was boosted by strong profitability from the JV business, which grew by 2x and higher other income, which was up by 37% YoY. The seaway business revival is expected to take some more time. While we expect healthy growth with a normal monsoon, healthy macros, and a revival in consumption post-elections. However, any meaningful improvement is expected only once the seaway business sees normalization. We maintain our EBITDA margin estimates at 10.5% over FY24-26E. We maintain an optimistic outlook, projecting a robust 15% CAGR in PAT over FY24-26E.

Valuations

TCI has well-diversified service offerings, a multi-sectoral presence, and a healthy balance sheet. The long-term outlook for the sector is improving, given strong economic growth prospects, increasing penetration of ecommerce, and GST & E-way bills. We value TCI at a P/E of 18x on FY26E and maintain an Accumulate rating, with a target price of Rs.1081.

For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer 

SEBI Registration Number: INH200000345