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MOSL: TRANSPORT CORPORATION OF INDIA: Robust performance yet again

TRANSPORT CORPORATION OF INDIA: Robust performance yet again

(TRPC IN, Mkt Cap USD0.7b, CMP INR709, TP INR860, 21% Upside, Buy

• TRPC reported a revenue of ~INR9b in 1QFY23 (up 30% YoY, but flat QoQ), 5% above our estimate. Strong growth was seen across Freight, Supply Chain, and the Seaways segment.
• EBITDA margin stood healthy at 11.5%, up 60bp YoY, but down 180bp QoQ. The same remains robust, led by the strong margin generated in the Seaways segment. Strong operating performance saw PAT grow 66% YoY to INR777m (13% above our estimate).
• The margin performance is likely to continue ahead as marine freight rates are expected to remain elevated and the high margin return cargo from Myanmar is expected to continue in the near to medium term. It expects to acquire a new ship by the end of FY23. We retain our revenue and earnings estimates for FY24 and maintain our Buy rating with a TP of INR860 (based on 17x FY24E EPS).

The Seaways segment continues to drive EBITDA margin

• EBITDA margin stood at 11.5% (up 60bp YoY, but down 180bp QoQ). EBITDA grew 37.4% YoY to INR1.12b (2% above our estimate).
• While Freight and Supply Chain segments saw some pressure on margin, the Seaways division continued to perform well, driven by higher freight rates and continued high margin return cargo from Myanmar.
• Going forward, blended EBITDA margin is likely to remain robust as Sea Freight rates are expected to remain firm. Margin improvement is expected in other segments of Freight and Supply Chain.

Highlights from the management commentary

• The LTL/FTL businesses in the Freight division stood at 35%/65% in 1QFY23. The management aims to increase the share of LTL revenue, which will result in an improvement in margin.
• The cost of acquiring a ship remains elevated. It expects to acquire a new ship by the end of FY23.
• The Seaways segment is benefiting from return loads from Myanmar and higher freight rates. Margin will remain elevated for the next two quarters.
• The Supply Chain segment saw an improvement on a sequential basis, with strong demand from the Auto vertical and a pickup in Farm activity.