Buy TCI Express; target of Rs 1021: Prabhudas Lilladher

Prabhudas Lilladher's research report on TCI Express

We cut our EPS estimates by 11%/4%/11% for FY25E/FY26E/FY27E amid 1) rising volume growth challenges 2) continued pressure on pricing and 3) inflationary cost environment. TCI Express reported weak set of results as revenues declined 5.0% YoY to Rs2,963mn (PLe/CE Rs3,140mn/Rs3,228mn) with an EBITDA margin of 10.3% (PLe/CE of 12.3%/12.1%) as volumes declined for 5th quarter in a row to 242,000 MT. Pricing pressure was also evident as realization was down 1.8% YoY to Rs12,245 per ton. While price hike in Jan-25 lends some comfort we believe volume growth challenges are likely to prevail in near term given weak consumer demand.

Outlook

However, as recovery gathers momentum and utilization levels improve to ~84%, operating leverage benefits can be significant resulting in sales/PAT CAGR of 11%/32% over FY25E-FY27E. Retain BUY with a TP of Rs1,021. We have rolled forward our valuation to FY27E and cut our target multiple to 24x (earlier 28x) given the ongoing challenges on volumes & pricing.