Buy TCI Express; target of Rs 2130 : Motilal Oswal

Motilal Oswal's research report on TCI Express

TCIE is a well-established player in the Express Logistics segment, with a pan India presence and catering to 95% of pin codes. It has a well-diversified client base with a focus on the high margin B2B space (95% share). - With a lease-based model for most of its required assets, TCIE enjoys greater operational flexibilities and generates a better return on assets. It is investing in sorting centers, which will usher a higher level of automation and better efficiency. TCIE has just operationalized its Pune sorting center, while its Gurugram center will be operational in 4QFY22. In recent times, TCIE has entered into newer segments like Rail Express, Cold Chain Solutions, and Customer-to-Customer (C2C) Express. This will increase its addressable market and generate a similar or better margin. We lower our FY23/FY24 EBITDA estimate by 5%/2% and earnings estimate by 4%/1% to factor in the expected increase in fuel price in the near term. We expect TCIE to clock a revenue/EBITDA/PAT CAGR of ~22%/28%/27% over FY21-24E. The recent stock price correction provides an attractive entry point in our opinion.

Outlook

We reiterate our Buy rating on TCIE with a revised TP of INR2,130, implying a potential upside of 25%. Our investment thesis is premised on: a) its presence in the high margin B2B Express segment, b) investment in value-added areas like sorting centers, c) entry into niche and highly profitable segments, and d) a debt free Balance Sheet.