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Addition of ships and traction in multi-modal logistics to aid growth…

…and underpin TRPC’s position as a preferred 3PL partner

* Transport Corporation of India (TRPC)’s revenue is likely to grow steadily in the medium term backed by: 1) the higher share of LTL in the freight division (36% in 1HFY24 vs. 33% in FY22), 2) steady automotive demand, which should support supply chain division, and 3) accruing benefits from the traction in multi-modal logistics. The company has an extensive fleet of more than 10,000 trucks, six cargo ships, and 14m sq. ft. of warehouse space.

* TRPC placed an order with a Japanese shipyard to buy two new ships of ~7,300MT each for a consideration of USD34m (INR2.7b). These vessels are slated for delivery on or before Jun’26. TRPC currently has six ships with a total capacity of 77,957MT.

* TRPC’s established infrastructure, long-standing customer relationships, and an experienced management team are anticipated to aid its position as a preferred 3PL partner. We expect TRPC to deliver a revenue/EBITDA/PAT CAGR of 14%/16%/17% over FY23-FY26. We reiterate our BUY rating on the stock with a TP of INR990, based on 15x FY26E EPS.

Tailwinds in organized logistics to cause sustainable growth across divisions

* Freight division is likely to benefit from a higher LTL contribution (40% by FY25E vs. 26% in 1HFY24), a shift from the unorganized sector, and traction in multi-modal logistics. We expect a revenue CAGR of 15% over FY23-26.

* Within the Supply Chain business, the sustained recovery in automotive demand – which accounts for ~80% of Supply Chain revenue – is projected to drive growth. The integrated supply chain market is predicted to achieve ~20% CAGR over FY20-26, with the organized market posting even faster growth.

* The Seaways segment is the highest margin segment for TRPC, and the expansion of fleet in this division is anticipated to aid in higher revenue and strong overall earnings growth for the company.

Valuation and view

*TRPC is one of the few companies present across a range of segments, giving it an edge over its peers. Through its multi-modal capabilities, it is better equipped to meet customer requirements and withstand any slowdown in the industry. With a robust growth outlook on Freight, Supply Chain, and Seaways, TRPC is in a sweet spot.

* We expect TRPC to deliver a revenue/EBITDA/PAT CAGR of 14%/16%/17% over FY23-FY26. Despite the strong outlook, TRPC is trading at ~13x on FY26E EPS. We reiterate our BUY rating on the stock with a TP of INR990, based on 15x FY26E EPS.

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