Transport Corporation of India Q2 Results Review - Performance Inline; Outlook Bright: Motilal Oswal

Motilal Oswal Report

Transport Corporation of India Ltd.'s revenue grew 7% YoY to ~Rs 9.9 billion in Q2 FY24 (in line), driven by the Supply Chain and Seaways segments (up 9% YoY each). Its freight division reported 3% YoY growth.

Ebitda margin came in at 10.1% (our estimate: 11%), down 20 basis points YoY/50 bp QoQ. Ebitda grew 5% YoY to Rs 1 billion and adjusted profit after tax rose 20% YoY to Rs 870 million (6% above our estimate). Ebit margin for freight/supply chain/seaways stood at 3.4%/6.7%/22.9%.

Ebit margin for freight/seaways contracted 70 basis points/160 bp YoY, whereas Ebit margin for the Supply Chain division improved 40 bp YoY. The company declared an interim dividend of Rs 2.5 per share.

Transport Corporation of India recently entered into an agreement to buy two new ships of ~7,300 million tonne each for a consideration of $34 million (~Rs 2.7 billion).

These vessels are slated for delivery on or before June 30, 2026. The purchase would be funded through internal accruals and debt.

Since the Seaways segment earns the highest margin, new capacity in this segment would improve the company’s overall profitability. While this segment is expected to report muted growth in FY25/FY26 as new ships will be delivered only in mid-CY26, we believe it will contribute well to total earnings from FY27 onward.

We have largely retained our estimates for FY24/FY25 and maintain our 'Buy' rating with a target price of Rs 930 (based on a price/earning multiple of 16 times FY25E earnings per share).

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