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Volumes and realization continue to lag

Quick Pointers:

* Volume growth of ~8% is expected in FY26E.

We cut our EPS estimates by 9%/7%/5% for FY26E/FY27E/FY28E as we tweak our GM assumptions given persistent cost inflation and sub-par fleet utilization. While surface transportation witnessed cost stabilization in 2QFY26, the non-surface business is facing inflation challenges (since the last 6 quarters GM has been consistently trending below 30% mark). TCIEXP IN reported weak set of results as revenues declined 1.0% YoY to Rs3,085mn (PLe Rs3,140mn) with an EBITDA margin of 10.9% (PLe 11.3%) as volumes remained flat at to 250,000 MT. Pricing pressure was also evident as realization was down 1.0% YoY to Rs12.3 per KG. Given stiff competition, we expect volume and realization CAGR of 6%/1% over FY25-FY28E. We expect sales/PAT CAGR of 7%/19% (driven by low base) over FY25-FY28E and retain HOLD with a TP of Rs705 (21x Sep-27E EPS; no change in target multiple). Faster than expected volume recovery & utilization is a key risk to our call.

Revenue declined by 1.0% YoY: Revenue decreased by 1.0% YoY to Rs3,085mn (PLe Rs3,140mn) on account of stagnant volumes. Gross margin declined to 28.7% (PLe 29.2%) with a fleet utilization of 83%.

EBITDA margin at 10.9%: EBITDA decreased by 9.0% YoY to Rs335mn (PLe Rs355mn) on account of weaker GM. EBITDA margin compressed to 10.9% (PLe 11.3%). PAT declined by 4.1% YoY to Rs239mn (PLe Rs245mn) for the quarter with a margin of 7.7%.

Con-call highlights: 1) TCIEXP IN remains debt-free with liquid assets of around Rs1,477mn. 2) Volumes for 2QFY26/1HFY26 stood at 2.5 lakh tons/4.8 lakh tons respectively. 3) Truck utilization stood at 83.0% in 2QFY26. 4) Capex of Rs280mn was incurred in 1HFY26 primarily towards branch expansion, sorting centers, and IT infrastructure upgrades. Capex of Rs1,700mn is lined up till FY27E. 5) Revenue growth of ~10% is expected in FY26E. 6) B2C segment currently forms ~2–2.5% of total revenue. Target is to scale it into a Rs1,000mn business over the next 2 years. 7) Automation systems implemented at the Gurugram and Pune sorting centres are being replicated at upcoming hubs in Kolkata (~1.5lakh sq. ft.) and Ahmedabad (~2.5lakh sq. ft.), with completion expected by Dec-26E to mid-FY27E. 8) The customer mix for the quarter is as follows: 48% - SMEs and 52% - Corporates 9) A total of ~60–80 new branches are planned to be added across all service lines in FY26E. 10) EBITDA margin is expected to improve to 12.5–13% range in 2HFY26E, driven by better asset utilization and sustained cost efficiencies. 11) The top 5 verticals: pharmaceuticals, electronics, engineering, garments & lifestyle, and automotive contributed ~55% of total revenue in 2QFY26.

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