Reduce TCI Express Ltd for the Target Rs 600 by Emkay Global Financial Services Ltd
TCIE delivered a healthy performance in 1QFY27, with revenue growing 9% yoy, primarily driven by volumes growing 7.5% yoy. The management indicated that fuel price hikes were passed through to customers in Jun-26 and its benefits would be fully reflected from 2Q onward. While the management remains confident of improving the current volume trajectory (FY27 guidance: 11-12%), we remain cautious and expect FY27E volume/revenue growth of 8%/12%. TCIE's efforts toward diversifying business beyond surface express seem to be fructifying, as air express grew 27-29% yoy. We view the management strategy—of growing multimodal services toward contributing 22- 25% to overall revenue in next 3-4 years—positively, given the diversification benefits. We also believe TCIE’s investments in automation remain a mediumterm lever, with benefits visible once volume growth trajectory is sustained. Factoring in the management's guidance and 1Q beat, we raise our FY28E EBITDA/PAT by ~12%/11%. We retain REDUCE while raising our Jun-27E TP by ~9% to Rs600 from Rs550 (DCF methodology), implying FY28E PER of 18x
Volume trajectory improves; uptick in margins awaited
TCIE posted revenue growth of 8.7% yoy in 1QFY27, on the back of 7.5% growth in volumes. Revenue growth was led by in-line growth in the surface segment, supported by higher business from existing customers, addition of new accounts, and steady demand across key industrial sectors. The e-com segment, contributing ~2.5% to revenue, grew 63% yoy, driven by higher shipment volumes across e-com and D2C platforms. EBITDA margin expanded by 24bps yoy to 10.0% (beating our/street estimates by 96bps/7bps); employee costs grew 9%, while other expenses declined 6% yoy. Adjusted PAT grew 5% yoy to Rs205mn, on the back of a healthy operational print, partly offset by an increase in depreciation (+34% yoy). 1QFY27 capex amounted to Rs190mn, while net cash stood at Rs1.18bn.
Call highlights
1) The management has guided for FY27 revenue growth of 15%, primarily driven by 11-12% growth in volumes and benefits of planned price hikes of mid-single-digits, including fuel surcharge for FY27.
2) The management remains optimistic about margin expansion of 100-150bps in FY27 (assuming no further fuel price hikes), driven by price increases (fuel cost hike passed through to ~90% customers) and higher focus on expanding SME share (currently at the long-term target of 50%).
3) In the last 4Y, TCIE has spent Rs2.9bn of its planned 5Y capex of Rs4bn; it expects to spend Rs1.1bn in FY27, mainly on automated centers in Kolkata (expected completion latest by 1QFY28) and Ahmedabad (expected to be completed by mid-FY28). Two hub automations are completed: Taj Nagar (North India) and Chakan (Pune).
4) TCIE added 35 branches in 1QFY27 (Surface: 10; Rail: 16; C2C: 10). 5) E-com vertical grew ~63% yoy, contributing 2.5% to revenue. D2C segment is growing well, with margins of 16-18%.
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