Foreign brokerage firm Jefferies is bullish TCI Express delivering a huge upside despite the logistics company reporting operating profits 13 percent below expectations on muted volumes in the September quarter of the current financial year.
One of the leading players in the express, part-truck load (PTL) segment, TCI Express reported an EBITDA of Rs 50.5 crore against analysts’ estimate of Rs 58.2 crore. Its revenue of Rs 320 crore came short of analysts’ expectations of Rs 341.5 crore, the report said.
The analysts lowered their earnings estimates for FY25-26 by 6-8 percent but believe that EPS will see a 24 percent CAGR in FY23-26, which would be the upside trigger.
Their target price is Rs 2,150, which is over 58 percent higher than the current market price of Rs 1,322.
Also read: TCI Express Standalone September 2023 Net Sales at Rs 319.98 crore, up 3.25% Y-o-Y
“Trucking fleet relationships, customer relationships, historical land bank for sorting centres are drivers of its high ROEs and margin management even in an inflationary environment,” the analysts said in their latest report.
They have assigned a lower multiple to factor in the weak earnings reported in the September quarter.
“The stock traded at a high of 63x and average of 31x since listing in Dec. 2016. Our revised PT of Rs2,150 v/s Rs2,320 factors in the revised EPS and is based on 35x PE Sep 2025E vs. 40x FY25E earlier as recent earnings are weak,” the wrote in the report.
According to the analysts, the earnings growth estimate of over FY23-26 (at 24 percent) and over 25 percent ROE in a high-growth industry for organised players would translate to a re-rating of the stock. The company is debt-free, they added.
Excessive price competition from new-age players and delays in the shift to organised logistics market were the risks listed by them.
The company’s capex plans seem to have reduced from earlier. It plans a Rs 5 billion capex over FY23-28, which implies a Rs1-billion annual run-rate. The management has given a guidance of Rs 800 million for FY24.
Twelve branches were added in the first half of this fiscal and 25-30 branch are planned for the second half, which would add to 42 at the higher end. It is lower than the 70-75 guidance given earlier for the fiscal.
At 2.11 pm, the stock was trading at Rs 1,324.95 on the National Stock Exchange, down 2.53 percent from the previous close.
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