TCI Express - Industry Headwinds Continue To Impact Volumes; Near-Term Outlook Remains Weak: Motilal Oswal

Motilal Oswal Report

We downgraded TCI Express Ltd. to Neutral (from Buy) in October 2024 after Q2 FY25 results, due to concerns over volumes and profitability. TCI Express’s business performance and volume growth have been impacted by additional cost pressures in the Air Express division, increased competition, and slower growth in key sectors such as manufacturing, automobiles, and textiles.

As per our channel check, volume growth was muted in Oct-Nov’24, which could lead to a weak performance in Q3 FY25 as well for TCI Express. Allcargo Gati, an express logistics peer of TCI Express, reported 13% month-on-month decline in volumes in Nov’24 (2% growth YoY).

During Oct-Nov’24, Gati reported just a 3% YoY growth in volumes, signaling subdued demand in Q3 FY25 so far. While the festive season in Q3 brought some QoQ volume growth for express logistics companies, their YoY performance remains weak, and this trend is expected to persist through the rest of FY25.

While the long-term outlook for surface express services remains positive, near-to medium-term headwinds such as heightened competition, weak rural demand, a consumption slowdown, and elevated inflation are likely to weigh on volumes.

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