The brokerage has ‘Buy’ rating on this Multibagger stock post Q3 result

Transport Corporation of India (TCI) posted a record performance for the third quarter of FY22, strong on all parameters. Among key segments, revenue from Seaways/Freight grew 43%/4% year-on-year (YoY). Overall EBITDA margins improved to a healthy 13%, led by the sewage segment.

Motilal Oswal retains its buy rating multibagger stock with a revised target price of 880 per share. The brokerage expects an increasing contribution from the high-margin sewage segment and an improvement in the share of less than truckload (LTL) business in the freight division to support margin performance.

Another brokerage Edelweiss is optimistic on improving its business mix on TCI, which with a diversified trading portfolio should achieve sustainable growth over the next three-four years. Management is bullish on demand and expects SCM to pick up in the coming quarters.

“Despite a strong rally, TCI is still trading at 16x one-year PE, providing reasonable valuation comfort. We expect our FY22/FY23E earnings to grow by 7%/9%. Against the revised target price of Keep ‘Buy’ with 875 (from 758),” it added.

The brokerage’s investment logic for TCI is based on improving its underlying business mix over the next three-four years. The company is targeting a high-margin LTL mix of 40% in the freight division. The supply chain division is part of the fast growing 3PL category, which is expected to register a CAGR of over 15% over the next five-seven years.

“TCI also plans to add capacity in its sewage division (now pushed to FY23), which should improve margins and help RoCE. Overall, TCI’s focus on setting up multi-modal capacities is the next four- Will see its development in five years.” Added note from Edelweiss.

TCI shares are up more than 183% in the one-year period, while the stock is down nearly 3% in 2022 so far (year-to-date, or YTD).

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.

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