IGI Logo

Growth outlook stable...margins to improve

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 in line with our expectations, led by supply chain and seaway businesses, which reported healthy double-digit growth.

* EBITDA was flat at 3.0% YoY, and margins dipped by 70bps YoY to 9.9% on account of a higher fuel costs and lower freight business.

* Net profit grew by 10% YoY, led by a higher share of profits from JV and other income.

* We anticipate stable volumes in freight, E-commerce, and supply chain businesses led by restocking ahead of festive, while seaway business is showing signs of gradual revival.

* We expect PAT to grow at a 17.3% CAGR over FY24-26E, with stable margins of ~10.5%.

* We value TCI at a P/E of 19x 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.1,169

Double digit growth….FY25 outlook positive

In Q1FY25, 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 modest growth of 8% YoY, as MSME growth was soft; hence, LTL business was impacted. The Seaway division saw a healthy 13% YoY growth despite 2 ships being at dry dock, attributable to firming up of rates and better volumes. Going ahead, TCI has placed an order for 2 vessels with an expected delivery schedule near the end of FY26, which is expected to drive growth in the long term. 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 15% CAGR over FY24-FY26E.

Margins to remain at 10.5% over FY24-26E

In Q1FY25, TCI’s EBITDA remained flat YoY, primarily attributed to a reduced contribution from the freight business and higher operating expenses. Consequently, margins witnessed a contraction of 70bps YoY, to 9.9%. However, Net profit was boosted by strong profitability from the JV business, which grew by 1.2x and higher other income, which was up by 28.2% YoY. 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 17.3% 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 e-commerce, and GST & E-way bills. We value TCI at a P/E of 19x on FY26E and maintain an Accumulate rating, with a target price of Rs.1,169.

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

SEBI Registration Number: INH200000345