Buy Transport Corporation of India, target price Rs 490: ICICI Direct

ICICI Direct has buy call on with a target price of Rs 490. The current market price of Transport Corporation of India Ltd. is Rs 359.

Transport Corporation of India Ltd., incorporated in the year 1995, is a Small Cap company (having a market cap of Rs 2780.22 Crore) operating in Logistics sector.

Financials
For the quarter ended 31-03-2021, the company reported a Consolidated Total Income of Rs 903.97 Crore, up 11.37 % from last quarter Total Income of Rs 811.68 Crore and up 34.01 % from last year same quarter Total Income of Rs 674.55 Crore. Company reported net profit after tax of Rs 55.09 Crore in latest quarter.

Investment Rationale
On the balance sheet front, TCI reduced its gross debt by Rs 130 crore in FY21, while generating Rs 300 crore of CFO (by keeping a tight leash on working capital). Going forward also, the brokerage expects the healthy CFO generation to continue with a net-debt free b/s. The management expects an improvement in margins by 50-100 bps (via better product mix, tech integration and cost control measures), which together with higher asset turnover is expected to achieve return ratios of 16-17% (in the medium to long term). The brokerage values the stock at Rs 490/share (SOTP basis) (earlier Rs 320) and maintain BUY rating.

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