Hold TCI Express; target of Rs 705 Prabhudas Lilladher

Prabhudas Lilladher's research report on TCI Express

We cut our EPS estimates by 9%/7%/5% for FY26E/FY27E/FY28E as we tweak our GM assumptions given persistent cost inflation and sub-par fleet utilization. While surface transportation witnessed cost stabilization in 2QFY26, the non-surface business is facing inflation challenges (since the last 6 quarters GM has been consistently trending below 30% mark). TCIEXP IN reported weak set of results as revenues declined 1.0% YoY to Rs3,085mn (PLe Rs3,140mn) with an EBITDA margin of 10.9% (PLe 11.3%) as volumes remained flat at to 250,000 MT. Pricing pressure was also evident as realization was down 1.0% YoY to Rs12.3 per KG. Given stiff competition, we expect volume and realization CAGR of 6%/1% over FY25-FY28E.

Outlook

We expect sales/PAT CAGR of 7%/19% (driven by low base) over FY25-FY28E and retain HOLD with a TP of Rs705 (21x Sep-27E EPS; no change in target multiple). Faster than expected volume recovery & utilization is a key risk to our call.