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Operational performance in line; lower tax outgo leads to APAT beat

* TRPC’s revenue grew 10% YoY to ~INR10.8b in 4QFY24 (in line). The freight and supply chain division clocked ~10%/13% YoY growth in 4QFY24, while the seaways division posted a decline of ~2% YoY.

* EBITDA margin came in at 10.1% in 4Q (down 90bp YoY/up 20bp QoQ) vs. our estimate of 10.6%. Overall margin was impacted by lower seaways margin and freight segment margin. EBITDA was flat YoY at INR1.1b, while APAT grew 23% YoY to ~INR1b (20% above our estimate). The beat in APAT during 4QFY24 was primarily driven by higher other income and a lower tax outgo.

* EBIT margin for freight/supply chain/seaways divisions stood at 3.2%/ 6.4%/26.4% in 4QFY24. EBIT margin for the freight and seaways businesses contracted 100bp and 130bp YoY, respectively, while EBIT margin for the supply chain division was flat YoY.

* During FY24, revenue increased 6% YoY to INR40.2b, EBITDA decreased 3% to INR4.1b, and EBITDA margin stood at 10.2%. APAT increased 10% YoY to INR3.5b.

* During FY24, the freight division revenue stood at ~INR20b (+4% YoY) and EBIT margin at 3.2%; the Supply chain division reported revenue of INR15.3b (+14% YoY) and EBIT margin at 6.5%; and the Seaways division reported revenue of INR 5.5b (-8% YoY) and EBIT margin at 25.1%.

* Operational performance in 4Q was largely in line with our estimates, with continued growth in the supply chain division. Going forward, the freight services segment is expected to gain from the transition to organized sectors, while the supply chain division should continue to grow even in FY25, supported by ongoing growth in the automotive industry. We have marginally increased our estimates for FY26 and reiterate our BUY rating with a revised TP of INR1,080 (based on 17x FY26E EPS).

Supply chain and freight division to witness robust growth; seaways to remain flat due to capacity constraints

* TRPC reported 4% growth in its freight services in FY24, primarily due to competitive pressure in the LTL segment. Going forward, as demand improves, the freight business is expected to witness strong growth, driven by the LTL segment.

* Within the supply chain business, the sustained recovery in automotive demand (~80% of supply chain revenue) is projected to drive growth.

* The seaways segment saw an 8% YoY decline in revenues in FY24 due to lower freight rates and dry dock of several ships. Seaways revenues are expected to remain flat to grow marginally in FY25. The growth in FY26 will be dependent on the adding another ship to its fleet.

Highlights from the management commentary

* TRPC plans to open 75 new branches for the freight business in FY25, building on the 30 branches added in FY24.

* Growth momentum in the supply chain business remained intact amid mixed uptrends in the automotive sector, retention and expansion of business with existing clients, and new business acquisitions. There was strong traction in multimodal services and the expansion of the hub-and-spoke network for auto finished goods.

* The cold chain sector is experiencing high growth, and the company plans to continue investing in this area.

* TRPC is in the process of acquiring two new ships, with delivery expected in 2- 2.5 years. It is also open to purchasing second-hand ships in the near term. The seaways division did not engage in international routes in FY24, and the market for purchasing ships has become tighter due to the Red Sea crisis.

* In FY25, TRPC expects revenue/PAT growth of 10%/15%.

* With a good monsoon and improving economic activity, the management anticipates a better performance in FY25. Margins are expected to improve in FY25, driven by growth in the overall volumes.

Valuation and view

* TRPC is expected to achieve steady growth due to a) increasing proportion of LTL shipments within the freight division (36% in FY24, up from 35% in FY23), and b) the ongoing demand in the automotive sector supporting the supply chain division and the growing benefits from the expansion of multi-modal logistics.

* We have marginally increased our estimates for FY26 and expect TRPC to achieve a CAGR of 14%/20%/17% in revenue/EBITDA/PAT over FY24-FY26. We reiterate our BUY rating on the stock with a revised TP of INR1,080, based on 17x FY26E EPS.

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