Buy Transport Corporation of India; target of Rs 280: ICICI Direct

ICICI Direct's research report on Transport Corporation of India

TCI reported strong Q2FY21 results. Revenues grew strong QoQ (up 87%), which led to normalisation of revenues YoY to Rs 612 crore. SCM reported highest recovery QoQ (up 134% QoQ, 2% YoY), followed by freight division (up 76% QoQ, down 9% YoY) and shipping division (up 37% QoQ, 9% YoY). The company continued to show resilience on the margins front. EBITDA margins expanded 63 bps YoY to 9.6% mainly due to lower employee and also other expenses to sales ratio (lower than estimates by 160 bps, 80 bps, respectively) although GMs negated the improvement, to an extent. The resultant EBITDA grew 4% YoY to Rs 59 crore. Further, PAT grew 29% YoY to Rs 32 crore (exceptional expense of Rs 10 crore in the base quarter).

Outlook

Also, TCI has transitioned to the post-Covid business landscape where customers demand greater digitisation, live tracking and online presence. On an SOTP basis, we value the stock at Rs 280/share and maintain our BUY rating on the stock.

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