TCI Express' Near-Term Outlook Remains Bleak Says Motilal Oswal Maintaining 'Neutral' Stance

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Motilal Oswal Report

We maintain a Neutral stance on TCI Express Ltd. due to ongoing challenges in volume and profitability. TCI Express is experiencing weak demand in certain industrial segments, including manufacturing, automobiles, and textiles, despite a healthy growth of ~22% YoY in e-way bill generation over Apr-Aug’25 and an 8.3% growth in the Index of Industrial Production for manufacturing motor vehicles, trailers, and semi-trailers—a key segment for TCI Express—during Apr-Jul’25.

This weakness in demand indicates that intense competition has hit TCI Express’ business performance and volume growth.

While management expects an 8–9% tonnage (vs a 1% volume dip in FY25) and 11–12% revenue growth in FY26, the margin improvement target could face challenges from persistent cost pressures, inflationary labor expenses, and relatively lower margins in international air express.

TCI Express has also planned a capex of Rs 2.8 billion over FY26-27, which would mainly be for sorting center automation and network expansion, as dependence on higher-margin multimodal segments could pose risks if demand recovery is slower than anticipated.

While the long-term outlook for surface express services remains positive, near-to-medium-term headwinds such as heightened competition and elevated freight costs are likely to weigh on margins and volumes.

We expect TCI Express to achieve an 8%/9%/20% volume/revenue/Ebitda CAGR over FY25-27. We reiterate our Neutral rating with a target price of Rs 730 (based on 22x FY27 EPS).

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