Transport Corporation of India Q1 Results Review - Inline; Supply Chain Division Aids Growth: Motilal Oswal

Motilal Oswal Report

Transport Corporation of India Ltd. reported revenue of ~Rs 9.5 billion in Q1 FY24, up 9% YoY (5% below our estimate). The freight and supply chain divisions grew 3% and 20% YoY, respectively. The high-margin seaways segment declined ~18% YoY during the quarter.

Ebitda margin contracted 90 basis points YoY to 10.6% (our estimate: 10.8%). The Seaways division’s Ebit margin rose 150 bp QoQ to 29.2% in Q1 FY24 from 27.7% in Q4 FY23. Further, Supply chain division’s Ebit margin improved 80 bp YoY.

Adjusted profit after tax grew 6% YoY to Rs 823 million (5% above estimate). Lower-than-expected tax rate supported profit after tax during the quarter.

While the freight services business is expected to benefit from the shift to organized sectors from the unorganised ones, the supply chain division is likely to continue its growth momentum driven by the automotive sector.

Transport Corporation's highest margin segment, seaways, is projected to remain flattish in FY24 as the new ship is yet to be added. However, the company is confident of adding the ship in H2 FY24.

We have raised our earnings per share estimate by 4% for FY25 to incorporate the improved outlook across segments. We maintain our 'Buy' rating with a revised target price of Rs 880 (based on a price/earning multiple of 15 times FY25E EPS).

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