Buy TCI Express; target of Rs 1750: Motilal Oswal

Motilal Oswal's research report on TCI Express

We reiterate our BUY rating on TCI Express Ltd (TCIE) with a TP of INR1,750. Our investment thesis on TCIE is premised on: a) its presence in the high margin B2B Express segment, b) expanding branch network in key markets, targeting the SME segment (the company added 73 branches between April’21 and Dec’22), c) incremental revenues from new services such as air express, rail express, cold chain express, C2C (~18% of revenues in 3QFY23), and d) addition of new automation sorting centers, which will potentially reduce turnaround time. TCIE is a well-established player in the Express Logistics segment, with a pan India presence. It has built a solid Hub and Spoke infrastructure with 925+ owned centers across India, servicing more than 50,000 locations across the country. Equipped with a well-diversified client base, the company focuses on the high margin B2B space (95% share). Approx. 50% of its revenue comes from SMEs, which we believe forms its loyal customer base.

Outlook

With strong earnings growth and no major capex, the company is expected to maintain strong return ratios (~24% RoE through FY23-25). We expect the company to clock a 9% volume CAGR over FY23-25, resulting in 11% revenue CAGR over the same period. We reiterate our BUY rating with a TP of INR1,750, based on 40x FY24 EPS.