Buy TCI Express, target price Rs 1,100: Emkay Global Financial Services

Emkay Global Financial Services has buy call on TCI Express Ltd. with a target price of Rs 1100. The current market price of TCI Express Ltd. is Rs 1063.0 .

TCI Express Ltd., incorporated in the year 2008, is a Mid Cap company (having a market cap of Rs 4046.86 Crore) operating in Logistics sector.

TCI Express Ltd. key Products/Revenue Segments include Freight & Demurrage for the year ending 31-Mar-2024.


Rationale
TCI's Q1FY25 print was weak owing to growing competitive intensity in the B2B express industry, exacerbated by a muted external environment. The management alluded to general elections leading to a temporary reduction in volumes in addition to its key customer segment (SME) facing elevated cost pressures resulting in lower utilization.
This has led to EBITDA margin contracting by ~400bps in Q1FY25. We believe double-digit volume growth would remain elusive, even in FY25 for TCIE.

Sustained network investments in automation (Kolkata and Ahmedabad hub to be commissioned in the next 12-18 months) and margin-accretive new services (20-22% contribution in 2-3 years) should aid margins, once volumes recuperate in the surface. We cut FY26E revenue/EBITDA/PAT by 2%/5%/5%, respectively, while retaining our ADD rating. Jun-25E TP is revised down to Rs1,100/sh (DCF methodology), implying FY26E EV/EBITDA of 19x and P/E of 30x.

Financials
For the quarter ended 30-06-2024, the company has reported a Consolidated Total Income of Rs 295.26 Crore, down -7.45 % from last quarter Total Income of Rs 319.04 Crore and down -3.62 % from last year same quarter Total Income of Rs 306.35 Crore. Company has reported net profit after tax of Rs 22.30 Crore in latest quarter.

Promoter/FII Holdings
Promoters held 69.6 per cent stake in the company as of 30-Jun-2024, while FIIs owned 1.59 per cent, DIIs 10.2 per cent.