ICICI Direct is bullish on Transport Corporation has recommended buy rating on the stock with a target price of Rs 350 in its research report dated February 14, 2019.
ICICI Direct's research report on Transport Corporation
Revenues grew 19% YoY to Rs 663 crore. The freight and shipping division grew 20% and 52% to Rs 311 crore (I-direct estimate: Rs 297 crore) and Rs 100 crore, respectively, whereas, the supply chain division grew a mere 10% to Rs 261 crore EBITDA margins contracted 34 bps to 9.1%. The margins came in above I-direct estimates mainly due to lower admin & other expense to sales ratio (3.6%). The resultant EBITDA grew 15% YoY to Rs 61 crore However, PAT grew a mere 7% YoY to Rs 30 crore as a better operational performance was negatively impacted by higher depreciation and interest expense.
We believe utilisation of the capacity in the medium term will push TCI towards blended margins of ~10% with a RoCE of ~15%. With multi-modal capabilities, we believe TCI has developed a strong moat around its business thereby delivering sustainable growth rates. On an SOTP basis, we value the company at Rs 350 per share with a BUY recommendation on the stock.
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