Broker’s call: TVS Supply Chain (Buy)

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Target: ₹265

CMP: ₹214.40

TVS Supply Chain Solutions (TSCS), one of those who pioneered 3PL in India in early 2000, is today the largest and among the fastest-growing integrated supply chain solutions companies in India. TSCS has acquired over 20 companies in the last 16 years to achieve its 3C objective (capability, customer, country). It enjoys one of the widest sectoral presences globally (across industrial, auto, consumer, healthcare, IT and tech infra).

In FY23, TSCS served over 8,700 customers (top 5/10/20 customers constitute 18/28/39 per cent respectively), including 72 ‘Fortune 500-2022’ companies.

Given the integration with customer operations, customer relationships are usually sticky in nature (average relationship of 12/10 years respectively for the top 10 customers in ISCS and NS segments respectively), thus providing significant revenue/margin visibility. Integration of TSCS’ large acquisitions (acquired in 2018/19) – which was hampered by several global headwinds such as US-China trade war, Brexit, Covid-19 pandemic, Russia-Ukraine conflict, etc. – is now complete and is ready for a giant leap.

Given the ultra-fragmented market and increasing outsourcing requirements of customers, we see TSCS in a sweet spot with a unique global presence and capabilities, and poised for significant operating profit growth over the medium term. We estimate TSCS to post 9/21 per cent CAGR in revenue and EBITDA respectively in FY23-26.