Transport Corporation of India (TCI) share price jumped more than 2 per cent to Rs 641.35 on Wednesday, and the stock is expected to rally another 41% going forward on the back of pickup in economic activity, normalization in transportation activity, and government reforms leading to formalization and market share gains for organized players like TCI, according to Motilal Oswal. The brokerage firm believes that TCI is well placed in the sector with its multi-modal logistics capabilities. So far this year, Transport Corporation of India shares have plunged over 12 per cent.

TCI well placed with multi-modal Logistics capabilities

The company has developed robust capabilities in multimodal logistics via its presence across major transportation modes. It has well-diversified service offerings from road freight, integrated supply chain solutions, sea freight, to a JV with CONCOR for rail freight. “These capabilities would be a key enabler for consistent growth in volumes and earnings for TCI over the next few years. With an improving share of the Seaways segment, margin is expected to remain at elevated levels,” said Motilal Oswal. TCI also has contracts in place with customers for passing on the increase in diesel prices. “With strong volumes, a rise in freight rates may be seamless. The impact of a diesel price increase on margin is also expected to be minimal,” the brokerage added.

TCI is a long-term play

According to analysts at Motilal Oswal Institutional Equities, TCI is a long-term play, backed by four key factors- Diversified clientele base, Improving share in the high-margin Less than Truckload (LTL) business in the Road Freight division, Strong presence in the high growth 3PL segment, and Rising contribution from the high margin Seaways segment. Motilal Oswal expects TCI to clock a revenue, EBITDA, PAT CAGR of 18%, 28% and 36% respectively over FY21-24.

Robust industry outlook brightens TCI’s growth prospects

According to the Motilal Oswal research report, 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. It will also benefit from 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,” it said. Additionally, 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 added.

Stock rating: BUY
Target price: Rs 880

Motilal Oswal expects the growth momentum to continue with pickup in economic activity, normalization in transportation activity, and government reforms leading to formalization and market share gains for TCI. “We reiterate our Buy rating on the stock with a target price of Rs 880,” it said.