Buy TCI Express; target of Rs 780: ICICI Direct

ICICI Direct’s research report on TCI Express

Revenues grew 15% YoY to Rs 263 crore. As per the management, the company was able to leverage its branch network of 700 centres across the country to achieve the growth and was also able to achieve a significant customer base in tier 2 cities EBITDA margins increased 126 bps to 11.8% mainly due to lower than estimated operating expense to sales ratio (73.8% vs. 75.8% in Q3FY18). Robust revenue growth coupled with margin expansion resulted absolute EBITDA growth of 29% YoY to Rs 31 crore Reported PAT grew 21% YoY to Rs 19 crore mainly due to a strong operational performance (although it was negatively impacted YoY by higher tax rate – 35% vs 29% in Q3FY18).

Outlook

We value TCIEL at 26x P/E on an estimated EPS of Rs 29.5/share (FY21E) with a target price of Rs 780, with a BUY recommendation. Key risks to our upside remain: 1) liquidity headwinds for SME sector (50% of TCI Express revenues), 2) rising competitive intensity (private equity funded players entering B2B space).

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First Published on Feb 25, 2019 04:32 pm

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