Buy TCI Express; target of Rs 1300: ICICI Securities

ICICI Securities research report on TCI Express

TCI Express (TCIE) Q1FY25 EBITDA was significantly below our/consensus estimates, mainly on account of underutilised capacity, higher operating cost and unabsorbed fixed cost. Key points: 1) Volume declined 2.1% YoY on subdued demand. 2) EBITDA margin declined to 11.2% (14.1% in Q4FY24), lowest since Q1FY21. 3) Railway business grew ~30% YoY and contributed to 2-2.5% of revenue for Q1FY25. 4) Incurred capex of INR 75mn during Q1FY25 and plans to incur capex of INR 3.3bn for FY25-27. 5) Truck utilisation level dipped to 82% in Q1FY25 (84% in FY24). While management has maintained its volumes growth guidance, we believe it is difficult for TCIE to achieve this in the current demand scenario.

Outlook

Hence, we cut our FY25E/FY26E EPS by 15%/12%. We list TCIE as one of the top picks in the logistics space. Retain BUY; TP revised to INR 1,300 (from INR 1,495) based on 34x FY26E EPS.