Buy This Small-Cap Logistics Stock For 21% Return, Planned Rs. 500 Crore Capex: ICICI Direct

Brokerage firm ICICI Direct recommends investors to buy the stocks of TCI Express, for a potential upside of 21% in the short term. The company has incurred Rs. 80 crore as Capex in FY22 to build sorting centres. TCI Express has also guided for Rs. 100 crore Capex in FY23, and has planned Capex of Rs. 500 crore in the upcoming 5 years (FY23-FY28).

Target Price, Current Market Price, and Company Performance

The Current Market Price (CMP) of TCI Express is Rs. 1650. ICICI Direct has estimated a Target Price for the stock at Rs. 2000. The stock has the potential to give a 21% return, in the upcoming 1 year. This is a small-cap company with a market capitalization of Rs. 6,316 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1650
Target Price	Rs. 2000
Potential 1 year return	21.00%
52 week high share price	Rs. 2,572
52 week low share price	Rs. 1,280

TCI Express has reported an in line performance, in the last quarter. Its revenues grew 7% YoY to Rs. 298 crore (2% volume growth), but EBITDA de-grew 8% YoY to Rs. 50 crore with margins at 16.8%. EBITDA margins in Q4FY21 although stood at 19.4%. Additionally, its PAT also de-grew 15% to Rs. 36 crore, due to high base effect.

ICICI Direct on the stock advantages

The board of the company has recently approved a buyback amounting to Rs. 75 crore through the open offer route at an indicative price of Rs. 2050. The management expects 50-100 bps improvement of the company each year, and it has guided for 16% volume growth in FY23 and revenue growth in the range of 20-22%. According to ICICI Direct, "Strong FCF generation due to efficient working capital management, higher growth, better margins from newer businesses and robust capital structure, make TCI Express well positioned to maintain and strengthen its leadership position among logistics peers. We remain positive on the stock and maintain our BUY recommendation."

Automation of warehouses of TCI Express is expected to provide execution with minimal human intervention, which helps in lower truck halting period and efficient warehouse management and is expected to build a strong entry barrier in the B2B segment. "Such steps are expected to drive the consolidated EBITDA margins above 20%+ levels. Newer businesses (rail express, pharma cold chain and C2C express) are expected to provide further room for margin improvement. Asset light business model, with projected 25%+ RoIC," the firm added.

Company profile: TCI Express

TCI Express is a leading asset-light B2B (95% of revenues) express logistics company with 28 sorting centres, 800+ owned pan-India centres covering around 40000 pick-up and delivery points. Their SME and corporate clients comprise 50:50 of overall revenues. Total 55% of revenues of the company comes from sectors like auto ancillary, pharma, engineering. TCI Express has added 45 new branches in FY22 and 10 branches in Q4. The company has also launched three new services Pharma Cold Chain Express, C2C Express and Rail Express, which are aligned to its growth as a multi-modal express delivery company in India. The company is expected to initiate a price hike of 4-5% in FY23 whereas last year it took a hike in the range of 2.5%. In FY22, the company operationalized the Pune and Gurgaon sorting centres, adding over 3.5 lakh square foot area in its sorting centre capacity.

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.