Buy This Smallcap Stock For Long-Term Gains Of Nearly 41%

TCI: A Good long-term story

According to the broking firm, TCI is a long-term play, backed by a diversified clientele base, improving share in the high-margin Less than Truck Load (LTL) business in the Road Freight division and a strong presence in the high growth 3PL segment. Rising contribution from the high margin Seaways segment is also likely to benefit the company.

"We expect TCI to clock a revenue/EBITDA/PAT CAGR of 18/28%/36% over FY21-24E. We reiterate our Buy rating on the stock with a target price of Rs 880 per share," Motilal Oswal has said.

Robust growth in freight and volumes

According to Motilal Oswal, road freight will benefit from impact of reforms like GST and e-way bill, which will result in a shift in market share towards organized players, and improved road connectivity, reducing the turnaround time.

"The Supply Chain segment is expected to grow well as issues related to the Auto sector stabilize. The increasing penetration of supply chain offerings into other sectors will aid growth. The Seaways segment is expected to grow well, with higher volumes and improved realization. The purchase of a new ship in FY23 will help boost the share of the high margin Seaways segment, which will aid earnings growth," the brokerage has said.

Valuation and view of Motilal Oswal

Motilal Oswal expects the growth momentum to continue, with a pickup in economic activity, and normalization in transportation activity,

According to the brokerage, the government reforms leading to formalization and market share gains for organized players like TCI.

"We expect TCI to clock a revenue/EBITDA/PAT CAGR of 18%/28%/36% over FY21-24E. The stock trades at 12x FY24E EPS. We maintain our Buy rating, with a revised target price of Rs 880 per share (17x FY24E EPS)," the brokerage has said.