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INCREASING GLOBAL TRADE TO LEAD THE COMPANY’S GROWTH; STRATEGIC INITIATIVES TO IMPROVE PROFITABILITY

The company's Global Freight Solutions (GFS) business, which operates within the global trade market, has demonstrated robust volume growth on a year-on-year basis. This volume growth, supported by higher freight rates in the market, drove the revenue of the Network Solutions (NS) segment. , the management has outlined five specific strategic initiatives focused on profit turnaround and bolstering profitability; (1) Pushing the business back to normal profitability; (2) Bolstering profitability going forward; (3) Achieving margin targets; (4) Creating space in the cost structure; (5) Improving the performance of specific segments.

BUSINESS DEVELOPMENT & CUSTOMER DIVERSIFICATION INITIATIVES AMIED AT BOLSTERING FUTURE EXPANSION

The company has demonstrated the ability to win large deals in mature markets, such as the U.K. and U.S. The management focuses on five initiatives to boost the revenues in the medium term period: (1) Robust business development; (2) Strong pipeline of opportunities; (3) Focus on winning large deals; (4) Adding Fortune 500 customers; (5) Diversified customer wins. We believe, with the management’s focus on these 5 points is likely to boost the company’s revenue and thereby achieve long term target of USD 2.5 billion revenue and USD 100 million profits.

OUTLOOK AND VALUATION

We The management’s focus on improving profitability alongwith it’s Business Development and Customer diversification initiatives is likely to boost both profitability and revenues for the company. Hence, we have forecasted annual sales growth in the range of ~9.8% - 11% between FY25E to FY27E derived a revenue of Rs. 12,334 crore for FY27E. We expect the PAT margins to remain in the range of 0.5%-2.5% through FY25E to FY27E and EPS of Rs. 7.0 in FY27E. As we assign a P/E multiple of 25x we arrive at a price target of Rs. 176 which gives us an upside of ~39% from CMP of Rs. 127. Hence, we initiate coverage on TVS Supply Chain Solutions Limited with a BUY rating over an investment horizon of 24-30 months.

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