‘Profitability, cash flow is the mantra’, says Jefferies on this Indian logistics stock with a ‘buy’ rating | Tech Reddy

“Profitability and cash flow are the key mantras, even if that means less revenue growth. B2B is 95% of revenue, e-commerce only 5%. Profitable business focus reflected in 25%+ ROE and we believe double-digit revenue growth, 28% EPS CAGR in FY22-25E is triggering upside going forward,” the note said.

Historical land bank for trucking fleet relationships, customer relationships, sorting centers are drivers of its high ROE and margin management even in an inflationary environment, according to Jefferies.

“The stock has traded at a high of 63x and an average of 31x since listing in December 2016,” Jefferies said with target price while maintaining his buy rating on TCI Express shares. ₹2,515 per piece.

The brokerage house believes the stock could see a re-rate as it consistently delivers 25%+ ROE in an industry set for high growth for organized players, with 28% EPS CAGR over FY22E-25E.

However, it sees excessive price competition from new age players; The transition to the organized logistics market takes longer than expected as downside risks.

“Management is confident of achieving 18-20% YoY revenue growth with margin expansion of 50-100 bps in FY23E, implying 17% YoY revenue growth in the next 2 quarters. The focus is on increasing reach through branches and growing business where value is better, especially across MSMEs 22 branches were added in 1H taking the total number to 920+ The lack of growth in cost of margins and cash flow was reiterated, even if peers were growing faster on the top line. ROE focus remains high,” the note added.

Profit after tax (PAT) at TCI Express grew by around 12% ₹38 crore in September quarter due to higher income. The company’s net profit stood at ₹34 crore in the same quarter of the previous financial year. Its total revenue increased during July-September 2022 ₹312 crore from ₹275 crore as compared to previous year.

The opinions and recommendations given above are those of individual analysts or brokerage companies, and not of Mint.