Buy TCI Express; target of Rs 1700: Motilal Oswal

Motilal Oswal's research report on TCI Express

TCI Express (TCIE)’s 2QFY24 revenue grew 3% YoY to ~INR3.2b, in line with our estimate. Volume stood at 0.25m tonnes (+2% YoY), while realization rose ~1% during the quarter. In 1HFY24, volume grew ~3% YoY (0.49m tonnes). Utilization improved sequentially to 84%. Volumes were impacted by the shift of festival-linked demand to Oct’23. Hence, 3QFY24 is expected to witness strong volume growth. EBITDA stood at INR505m with margin of 15.8% (est. 16.2%). PAT came in at INR356m (5% below our estimate) with margin of 11.1%. TCIE generated CFO of INR385m in 1HFY24 vs. INR1.5b in 1HFY23. Total cash and bank balance as of Sep’23 were INR150m. Net working capital days stood at 23 in 2QFY24 vs. 24 in 2QFY23. ROE/ROCE for 1HFY24 were at 22%/29%. The 2Q performance was largely in line with our estimate. Given a softened outlook, we cut our EPS estimates by ~4%/3% for FY24/FY25.

Outlook

We expect a CAGR of 8%/10%/16%/16% in volume/revenue/EBITDA/PAT over FY23-25, aided by automation and branch network expansion, resulting in improved operating efficiencies. Capex of INR5b is envisaged over FY23-28 for setting up its own sorting centers and corporate office in Gurugram, Haryana. Reiterate BUY with a revised TP of INR1,700 (based on 35x FY25E EPS).