Buy TCI Express; target of Rs 900: ICICI Direct

ICICI Direct's research report on TCI Express

TCI Express’ (TCIEL) revenue saw strong sequential improvement in revenues (although YoY still not normalised). MoM also the momentum remained on a positive trajectory, brought about by a broad-based recovery across sectors. EBITDA margins expanded 1300 bps QoQ (389 bps YoY) to 15.3% mainly due to cost control measures employed by the company, which is evident in lower employee, other expenses and higher gross margins. Subsequently, absolute EBITDA came in at Rs 33 crore vs. Rs 2 crore in Q1FY21 and Rs 31 crore in Q2FY20. Buoyed by the strong operating performance, PAT came in at Rs 24 crore vs Rs 1 crore in Q1FY21 and Rs 26 crore in Q2FY20 (YoY de-growth due to lower tax rate in the base quarter).

Outlook

The management’s singular focus on carrying profitable shipments in the B2B segment along the surface route, has consistently led to stable operational performance, even amid lower volumes scenario (as seen in H1). Low leverage, a robust growth trajectory and high core return ratios (FY22E RoCE at 28%, healthy FCF yield), position TCIEL as one of the preferred picks in the logistics space. We value TCIEL at 33x P/E with a target price of Rs 900 and maintain our BUY recommendation.

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