Buy TCI Express; target of Rs 936: YES Securities

YES Securities' research report on TCI Express

TCI Express Ltd (TCIE) reported 65% yoy decline in revenues during Q1 FY21 largely impacted by COVID-19 related lockdown. While Apr’20 was a total washout, utilization in May’20 picked up gradually to 35% followed by ~58% activity in Jun’20. During the quarter, the Company took price hikes for certain customer segments which led to a 3% improvement in blended realization. Operating margin declined to 2.3% (-926 bps yoy) during Q1 FY21. This was primarily due to sharp decline in revenues owing to nationwide lockdown. Utilization in Jun’20/Jul’20 has improved to ~58%/~80% (vis-à-vis ~35% registered in May’20) with pick-up in economic activity. We expect utilization to reach Pre-COVID levels by start of H2 FY21. We believe significant part of revenue loss would be covered up in H2 FY21 leading to a marginal revenue decline for FY21.

Outlook

The cost cutting measures, price hikes, opening of owned sorting centers at select locations would ensure improvement in operating margin performance. We maintain our estimates for FY22 and retain our BUY rating on the stock with a 12m TP of Rs.936 (32x FY22 PE multiple).

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