India Equity Research Logistics August 13, 2024

TCI EXPRESS
RESULT UPDATE

KEY DATA
Rating HOLD
Elevated cost dents margins
Sector relative Neutral
Price (INR) 1,129
12 month price target (INR) 1,160 TCI Express (TCIEXP) reported a 2% YoY dip in volumes to 245k, driving
52 Week High/Low
Market cap (INR bn/USD bn)
1,555/998
43/0.5
a 4% YoY decrease in revenue to INR2.9bn. EBITDA slid 28% YoY with
Free float (%) 0.0 margins contracting 380bp YoY to 11.4%, mainly due to higher cost
Avg. daily value traded (INR mn) 87.7
and lower utilisation. PAT fell 29% YoY. Utilisation levels stood at 82%
in 1QFY25. Nonetheless, management highlighted that the back-
SHAREHOLDING PATTERN ended festive season augurs strong growth in H2FY25.
Jun-24 Mar-224 Dec-23
TCIEXP’s investment in automation centres is paying off. Even so, the
Promoter 69.6% 69.6% 69.62%
FII 1.6% 2.42% 2.93%
risk-reward at the current juncture is not favourable in our view; We
DII 10.21% 8.91% 8.36% forecast a revenue/EBITDA/PAT CAGR of 9%/13%/12% over FY24–27E.
Pledge 0% 0% 0% This along with a valuation of 25x Sep-25E yields an unchanged TP of
INR1,160; retain ‘HOLD’.
FINANCIALS (INR mn) Lower volumes coupled with higher cost impact performance
Year to March FY24A FY25E FY26E FY27E
TCI Express (TCIEXP) reported a volume decline of 2% YoY to INR2.9bn affected by
Revenue 12,538 13,604 14,964 16,461
EBITDA 1,872 2,184 2,420 2,679
adverse weather conditions, general elections and a muted SME performance.
Adjusted profit 1,317 1,529 1,706 1,869 Utilisation levels contracted 100bp YoY to 82%. EBITDA slid 28% YoY to INR335mn
Diluted EPS (INR) 34.2 39.7 44.3 48.6 mainly due to lower utilisation levels and higher cost. EBITDA margins contracted
EPS growth (%) (7.5) 16.1 11.6 9.6 380bp to 11.4% (impact of 150bp due to lower utilisation and 100bp on account of
RoAE (%) 20.3 20.0 19.0 17.9
higher airline cost). PAT fell 29% YoY to INR305mn.
P/E (x) 32.8 28.3 25.4 23.1
EV/EBITDA (x) 28.0 23.8 21.2 18.9 Focus on multimodal business continues
Dividend yield (%) 0 0 0 0
TCIEXP continues to focus on its multimodal business, which allows it to provide
integrated logistics solutions to customers. The company is targets 20–22% of
consolidated revenue from this segment over the next two–three years (current 7–
CHANGE IN ESTIMATES 7.5%). Furthermore, the company incurred capex of INR75m towards automation of
Revised estimates % Revision its delivery centres. The company enabled the AI-automated cross-belt sorter in
Year to March FY25E FY26E FY25E FY26E Pune, which has increased productivity. Furthermore, it intends to automate
Revenue 13,604 14,964 (3.8) (1.0) facilities in Ahmedabad and Kolkata over the next 12–18 months. The airline
EBITDA 2,184 2,420 (8.9) (5.5) segment should stabilise with healthy growth of multimodal segment.
Adjusted profit 1,529 1,706 (7.5) (5.8)
Management remains hopeful; risk-reward unfavourable in our view
Diluted EPS (INR) 39.7 44.3
TCIEXP’s asset-light model along with strategic initiatives shall drive growth.
Company had been focusing on expanding its multimodal business, which would
enable it to evolve into an integrated logistics player. Moreover, with cost stabilising
PRICE PERFORMANCE and utilisation improving, margins should tick up. Besides, with automation of its
facilities, volumes should improve ahead. We reckon a revenue/EBITDA/PAT CAGR
1,550 82,000
1,440 78,200 of 9%/13%/12% over FY24–27E. That said, in our view, the current valuation leaves
1,330 74,400 very little on the table, implying little scope for a positive surprise. We value the
1,220 70,600
stock at 25x Sep-25E, yielding an unchanged TP of INR1,160, retain ‘HOLD’.
1,110 66,800
1,000 63,000 Financials
Aug-23 Nov-23 Feb-24 May-24 Year to March Q1FY25 Q1FY24 % Change Q4FY24 % Change
TCIEXP IN Equity Sensex
Net Revenue 2,930 3,049 (3.9) 3,171 (7.6)
EBITDA 335 464 (27.7) 448 (25.2)
Adjusted Profit 231 323 (28.5) 316 (26.8)
Diluted EPS (INR) 6.0 8.4 (28.2) 8.2 (26.5)

Achal Lohade Harshit Sarawagi Sayam Vanigota

[email protected] [email protected] [email protected]

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 TCI EXPRESS

Financial Statements
Income Statement (INR mn) Balance Sheet (INR mn)
Year to March FY24A FY25E FY26E FY27E Year to March FY24A FY25E FY26E FY27E
Total operating income 12,538 13,604 14,964 16,461 Share capital 77 77 77 77
Gross profit 3,953 4,326 4,699 5,103 Reserves 6,964 8,184 9,582 11,143
Employee costs 1,339 1,379 1,462 1,549 Shareholders funds 7,041 8,261 9,659 11,220
Other expenses 741 764 817 874 Minority interest 0 0 0 0
EBITDA 1,872 2,184 2,420 2,679 Borrowings 30 30 30 30
Depreciation 190 230 250 270 Trade payables 917 745 820 902
Less: Interest expense 15 10 10 10 Other liabs & prov 518 544 577 614
Add: Other income 72 100 120 100 Total liabilities 8,505 9,580 11,085 12,766
Profit before tax 1,740 2,044 2,280 2,499 Net block 4,231 5,501 6,251 6,981
Prov for tax 423 515 575 630 Intangible assets 287 287 287 287
Less: Other adjustment 0 0 0 0 Capital WIP 161 161 161 161
Reported profit 1,317 1,529 1,706 1,869 Total fixed assets 4,678 5,948 6,698 7,428
Less: Excp.item (net) 0 0 0 0 Non current inv 0 0 0 0
Adjusted profit 1,317 1,529 1,706 1,869 Cash/cash equivalent 166 559 1,212 1,844
Diluted shares o/s 39 39 39 39 Sundry debtors 2,318 2,515 2,766 3,043
Adjusted diluted EPS 34 40 44 49 Loans & advances 1,343 559 410 451
DPS (INR) 0 0 0 0 Other assets 0 0 0 0
Tax rate (%) 24.3 25.2 25.2 25.2 Total assets 8,505 9,580 11,085 12,766

Important Ratios (%) Free Cash Flow (INR mn)

Year to March FY24A FY25E FY26E FY27E Year to March FY24A FY25E FY26E FY27E
EBITDA margin (%) 14.9 16.1 16.2 16.3 Reported profit 1,740 2,044 2,280 2,499
EBIT margin (%) 13.4 0 0 0 Add: Depreciation 190 230 250 270
Net profit margin (%) 10.5 11.2 11.4 11.4 Interest (net of tax) (26) (90) (110) (90)
Revenue growth (% YoY) 1.0 8.5 10.0 10.0 Others 33 0 0 0
EBITDA growth (% YoY) (3.7) 16.6 10.8 10.7 Changes in WC (176) 442 6 (199)
PBT growth (%) (5.7) 0 0 0 Operating cash flow 1,358 2,110 1,851 1,851
Adj. profit growth (%) (7.5) 16.1 11.6 9.6 Less: Capex (461) (1,500) (1,000) (1,000)
Asset turnover (X) 1.9 0 0 0 Free cash flow 898 610 851 851

Assumptions (%) Key Ratios

Year to March FY24A FY25E FY26E FY27E Year to March FY24A FY25E FY26E FY27E
GDP (YoY %) 5.8 5.8 5.8 5.8 RoE (%) 20.3 20.0 19.0 17.9
Repo rate (%) 5.5 5.5 5.5 5.5 RoCE (%) 26.9 26.7 25.5 24.0
USD/INR (average) 81.0 81.0 81.0 81.0 Receivable days 65 65 64 64
Surf. - Tonnage (% YoY) 8.0 0 0 0 Payable days 26 22 19 19
Surface real. (% YoY) 0.8 0 0 0 Cash conversion cycle 38 43 45 45
Air-Tons carried (% YoY) 20.0 0 0 0 Working cap (% sales) 19.4 14.7 13.3 13.3
Capex (INR mn) 519 0 0 0 Gross debt/equity (x) 0 0 0 0
Net debt (INR mn) (138) 0 0 0 Net debt/equity (x) 0 (0.1) (0.1) (0.2)
Cash conversion days 38 43 45 45 Interest coverage (x) 114.5 195.4 217.0 240.9

Valuation Metrics Valuation Drivers

Year to March FY24A FY25E FY26E FY27E Year to March FY24A FY25E FY26E FY27E
Diluted P/E (x) 32.8 28.3 25.4 23.1 EPS growth (%) (7.5) 16.1 11.6 9.6
Price/BV (x) 6.1 5.2 4.5 3.9 RoE (%) 20.3 20.0 19.0 17.9
EV/EBITDA (x) 28.0 23.8 21.2 18.9 EBITDA growth (%) (3.7) 16.6 10.8 10.7
Dividend yield (%) 0 0 0 0 Payout ratio (%) 0 0 0 0
Source: Company and Nuvama estimates

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 TCI EXPRESS

1QFY25 conference call highlights

 Guidance: The company targets double-digit volume growth in FY25 and 12-15%
growth in FY26. EBITDA margins to improve 150-200bp from 2QFY25 onwards.

 Volumes: Volumes stood at 235k tonnes (contraction of 2% YoY). Volumes were

impacted due to general elections and adverse weather conditions.

 Capacity Utilisation: Utilisation contracted by 1% to 82% during the quarter. This

led to 150bp contraction on margin level.

 Margins: EBITDA margins have been impacted due to higher cost and lower
utilisation levels. Moreover, due to consolidation in the airline sector, airline had
been increasing cost which have dented margins. However, company expects
margins to improve in the upcoming quarters.

 Business mix: The mix between B2B and B2C stands at 97% and 3% respectively.

 Multimodal business: Focus remains on multimodal business with target to

increase contribution to 20% of the total revenues from this segment over the
next 2-3 years.

 Rail logistic segment: The company have expanded their customer base to over
5,000 and opened five new branches to enhance the network. Company is
equipped to service 24, 48, 72 hours and 96 hour deliver schedules.

 Air segment: The segment saw a rise in costs primarily due to the consolidation
of airlines, which led to reduced competition and higher freight rates.
Additionally, other cost increases in this segment further pressured margins.

 Capex: TCIEXP incurred INR75m towards capex, primarily to develop sorting

centres. The automation of the Pune sorting centre, covering 140,000 square
feet with an AI-enabled automated cross-belt sorter, has significantly boosted
the efficiency in Western India. Furthermore, the company intends to extend this
automation strategy to its sorting centres in Ahmedabad and Kolkata over the
next three years.

 Money back guarantee scheme: Its money back guarantee scheme had been a
standard-setting initiatives guaranteeing on-time delivery. This is enabling strong
customer relationship, which will drive performance and growth.

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 TCI EXPRESS

Revenue trends EBITDA and margin trends

3.3 7.5 650 20.0

5.0 15.2 15.8
520 14.6 14.1 16.0
3.2 5.0
3.3
11.4
3.0 2.5 390 12.0

INR m
INR bn

-0.8 260 8.0

2.9 -
-2.8 130 4.0
2.8 -2.5

448
464

505

456

335
-3.9
3.2
3.0

3.1

3.2

2.7 2.9 -5.0

0 -

4Q24
1Q24

2Q24

3Q24

1Q25
2Q24
1Q24

3Q24

4Q24

1Q25

EBITDA- LHS EBITDA Margin (%)- RHS

Revenue yoy growth (%)

Source: Nuvama Research, Company Source: Nuvama Research, Company

PAT trends Volume trends

400 2.6 6.0

4.3

320 2.5 4.0

2.0 2.0
'000 tonne

240 2.4 2.0

INR bn

2.3 -1.2 -
160
-2.1
2.3 -2.0
80
2.4

2.5

2.5

2.6

2.4
356
323

322

316

231

2.2 -4.0
0
1Q24

2Q24

3Q24

4Q24

1Q25
2Q24
1Q24

3Q24

4Q24

1Q25

Volumes (tonnes) yoy growth (%)

PAT

Source: Company, Nuvama Research Source: Company, Nuvama Research

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 TCI EXPRESS

Quarterly financials
INR mn 1Q24 1Q25 YoY 4Q24 QoQ
Net sales 3,049 2,930 -4% 3,171 -8%
Operating cost 2,090 2,089 0% 2,170 -4%
Gross Profit 958 841 -12% 1,001 -16%
Gross Margin 31.4% 28.7% -270 bps 31.6% -290 bps
Employee cost 333 338 1% 336 1%
% of sales 10.9% 11.5% 60 bps 10.6% 100 bps
Other expenses 161 168 4% 217 -23%
% of sales 5.3% 5.7% 40 bps 6.8% -110 bps
Total expense 2,585 2,594 0% 2,723 -5%
EBITDA 464 335 -28% 448 -25%
EBITDA margin 15.2% 11.4% -380 bps 14.1% -270 bps
Depreciation 46 51 10% 49 5%
EBIT 418 285 -32% 400 -29%
Other Income 15 23 54% 19 18%
PBIT 433 307 -29% 419 -27%
Interest 4 3 -31% 4 -33%
PBT 429 305 -29% 415 -27%
Tax Expense 105 74 -30% 99 -26%
Tax Rate 24.6% 24.1% -50 bps 23.9% 20 bps
Reported Net Profit 323 231 -28% 316 -27%
Adjusted Net Profit 323 231 -28% 316 -27%
Source: Nuvama Research, Company

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 TCI EXPRESS

Company Description
TCI Express is an India-based company engaged in offering transport, storage,
warehousing, and support services for transportation. The company is engaged in
express distribution and offers a single window door-to-door solution to customers.
It offers express solutions with over 40,000 pickup and delivery locations with its
containerised fleet of vehicles. The company also provides round-the-clock services,
time sensitive express deliveries by air mode and provides services to ~200 countries
across the globe.

Investment Theme
TCI Express (TCIE) is one of the leading surface express companies in India with 5%
market share in the B2B space. In our view, the company is well-positioned for
multiyear growth as it: i) continues to be a beneficiary of the structural shift from air
express to road express; ii) has all the right enablers in place to outpace peers; and
iii) is gearing up for growth through the next decade with INR4bn worth of
investment, which is likely to quadruple its sorting centre capacity.

Key Risks
As the express market is a premium category, we assume reasonably frequent pass
through of higher fuel costs. Inability to pass through would be a downside risk. We
expect operating leverage gains over the next three years; inability to achieve
margin expansion can be a downside risk

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 TCI EXPRESS

Additional Data
Management Holdings – Top 10*
CEO Chander Agarwal % Holding % Holding

CFO Mukti Lal HDFC MF 4.26

Nippon Fund 1.62
COO
Canara Robecco 1.61
Other Nirmal Mishrila 1.13
Auditor R.S. Agarwala & Co.
*Latest public data

Recent Company Research Recent Sector Research

Date Title Price Reco Date Name of Co./Sector Title
Weak performance continues; Domestic growth alleviates EXIM
10-May-24 1105 Hold 09-Aug-24 Container Corporation
Result Update pain; Result Update
Weak performance given muted Disappointing performance yet
13-Feb-24 1276 Hold 06-Aug-24 VRL Logistics
demand; Result Update again; Result Update
Soft quarter; growth remains a
18-Oct-23 1370 Hold 03-Aug-24 Delhivery On the right path; Result Update
concern; Result Update

Rating and Daily Volume Interpretation

2525 12

2020 10

8
1515
(INR)

(Mn)
6
1010
4
505 2

0 0
Apr-22

Jun-22

Apr-23

Jun-23

Apr-24

Jun-24
Aug-21

Dec-21

Feb-22

Aug-22

Dec-22

Feb-23

Aug-23

Dec-23

Feb-24
Oct-21

Oct-22

Oct-23

Volume TCIEXP IN Equity Buy Hold Reduce

Source: Bloomberg, Nuvama research

Rating Rationale & Distribution: Nuvama Research

Expected absolute returns
Rating Rating Distribution
over 12 months
Buy 15% 219

Hold <15% and >-5% 59

Reduce <-5% 27

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 TCI EXPRESS

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 TCI EXPRESS
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ABNEESH
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0HUOyNu,

KUMAR
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Head of Research Committee 8d54fd4f7ba4be4d07cb750c531c68e2c,

postalCode=400098, st=Maharashtra,
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ROY
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Date: 2024.08.14 01:35:44 +05'30'
Adobe Acrobat version: 2024.002.20991

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