At Rs 290, TCI is a good buy

At Rs 290, TCI is a good buy

By Rajiv Kapoor | 5 November, 2017

Transport Corporation of India Ltd (TCI) is an integrated supply chain and logistics solutions provider. The company offers multimodal transportation solutions working in different segment divisions such as energy, freight, supply chain solution and seaways. All the different divisions work under a separate subsidiary—TCI Freight, TCI Supply Chain, TCI Seaways and TCI Global, among others. TCI Freight is a surface transport entity. TCI Supply Chain offers services to sectors such as auto, retail, telecom, electrical and pharmaceutical. TCI Seaways caters to coast cargo requirements for transporting containers and bulk cargo. On the other hand, TCI Global provides customer clearance, international inbound and outbound freight handling, third party logistics, multimodal services and project cargo. The company has a fleet of customised vehicles and over 10 million square feet of warehousing space. In the year 2017-18, India will remain the fastest growing G20 economy, and private consumption, which has been lagging for some time, should recover gradually, with excess capacity in some sectors diminishing, infrastructure projects maturing, banks cleaning up their loan portfolios and the implementation of GST. The transport and logistics sectors are fundamental to the development of the Indian economy. The logistics market is expected to grow at a CAGR of over 12% on the back of growth in manufacturing, retail, FMCG and e-commerce sectors. The key drivers of this growth are infrastructure development investment associated with ports, airports, any domestic demand growth and increasing trade. Development of transportation and logistics related infrastructure such as dedicated freight corridors, logistic parks, free trade warehousing zones and container freight stations are expected to improve efficiency in a big way. Government reform initiatives, promotion of manufacturing and trade, improving the investment climate are all expected to transform the industry and drive growth over the next few years. The logistics firms are moving from a traditional set-up to the integration of IT and technology to their operation, to reduce the costs incurred, as well as to meet the service demands. Apart from hard infrastructure, the growth of the Indian logistics sector depends upon its soft infrastructure like education, training and policy framework.

Logistics provider TCI reported stellar Q2FY18 numbers, with profit after tax growing 29% to Rs 25.6 crore, as against Rs 19.7 crore in the corresponding quarter of the previous fiscal. The total revenue grew by 16.6% to Rs 527.4 crore during the quarter, as against Rs 452.3 crore in the year ago period. Also, the management commented on the quarterly earnings that TCI witnessed good growth on the back of continued focus on high margins businesses and providing specialised integrated supply chain solutions. In fact, GST readiness has become an opportunity for the company to stand out from the rest of the industry and post higher volumes for the next few quarters. The TCI stock, currently quoting at Rs 290 on the stock exchanges is a good fundamental buy for six months’ investment horizon, with a price appreciation target of Rs 340.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 

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