Buy Transport Corporation of India Ltd For Target Rs.1,100 by Motilal Oswal Financial Services Ltd
Steady performance; seaways and supply chain to drive earnings
* Revenue grew ~15% YoY to INR13.9b in 2QFY27 (in line). EBITDA margin came in at 10.4% (down 10bp YoY/40bp QoQ) vs. our estimate of 10.6%.
* EBITDA grew ~14% YoY to INR1.44b (in line), while APAT rose 3% YoY to ~INR1.16b (in line).
* Supply chain revenue grew 11% YoY, while freight/seaways divisions reported 12%/29% YoY growth.
* EBIT margin for Freight /Supply Chain/Seaways divisions stood at 2.4%/ 5.7%/32.6%. EBIT margin for Freight/Supply Chain rose 10bp each YoY, while seaways business margin contracted 490bp YoY.
* Freight and Supply Chain EBIT margins stood at 2.4% (+10bps YoY) and 5.7% (+10bps YoY), respectively, in 2QFY27. Seaways EBIT margin stood at 32.6%, down from the peak of 40.6% in 3QFY26. The peak margin was driven by favorable fuel prices and stronger freight rates. Going forward, Seaways margins are expected to remain range-bound amid higher and volatile fuel prices and incremental depreciation expenses as new ships are added to the fleet.
* TRPC delivered a steady performance amid headwinds from the West Asia crisis, inflationary pressure, and volatile bunker fuel prices, which weighed on margins. The freight business reported steady growth, while the supply chain business growth moderated on a high base. Seaways revenue growth was strong due to higher prices, while margins were impacted by fuel price volatility. Going ahead, we expect growth to be driven by steady strength in the Seaways segment, continued expansion in Supply Chain, and gradual improvement in Freight margins, supported by a higher LTL mix and increasing multimodal logistics adoption through new ships and rakes. We retain our estimates and reiterate our BUY rating with a TP of INR1,100, based on 16x FY28E EPS
Seaways facing near-term headwinds due to high fuel prices; freight growth remains steady
* Freight: Revenue in segment grew ~12% YoY during 2QFY27 on account of steady volume growth. EBIT margin stood at 2.4%, up 10bp YoY.
* Supply Chain Solutions (SCS): Supply Chain revenue grew ~11% YoY, driven by steady demand across PV mobility, retail, consumer, and quick commerce. EBIT margin stood at 5.7%, up 10bp YoY
* Seaways: The segment’s revenue grew ~29% YoY in 2QFY27. EBIT margin stood at 32.6%, declining 490bp. The business reported flat volumes, with revenue growth driven by pricing; however, higher bunker prices weighed on margins.
Joint Ventures
* The company’s joint ventures posted steady revenue growth in 1HFY27.
* The TCI- Concor JV revenue rose ~11% YoY.
* The company handled 0.08mn TEUs in 1HFY27 similar to 2HFY26.
* The Transystem JV with Mitsui continued to deliver steady performance, with 7.3% YoY growth in 1HFY27.
* Cold Chain JV reported ~50% growth in 1HFY27, supported by customer additions in the quick commerce and retail verticals. Capital employed in the cold chain segment has now crossed INR1.1b.
Guidance
* TRPC maintains its consolidated revenue and profit growth guidance in the range of 10-12% for FY27.
* YTD, the company incurred a capex of ~INR3.4b and plans to invest ~INR6b in FY27, with ~INR2.4b to be used for ships.
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