Broker’s call: Transport Corp (Buy)

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Target: ₹880

CMP: ₹759

Transport Corporation of India (TRPC) reported revenue of about ₹950 crore in Q1-FY24, up 9 per cent YoY (5 per cent below our estimate). The Freight and Supply Chain divisions grew 3 per cent and 20 per cent YoY, respectively. The high-margin Seaways segment declined about 18 per cent YoY during the quarter.

EBITDA margin contracted 90bp YoY to 10.6 per cent (our est. 10.8 per cent). APAT grew 6 per cent YoY to ₹82.30 crore (5 per cent above estimate). Lower-than-expected tax rate supported PAT during the quarter.

While the freight services’ business is expected to benefit from the shift to organised sectors from the unorganised, the supply chain division is likely to continue its growth momentum driven by the automotive sector.

TRPC’s highest margin segment, Seaways, is projected to remain flattish in FY24 as the new ship is yet to be added. However, the company is confident of adding the ship in 2HFY24.

We have raised our EPS estimate by 4 per cent for FY25 to incorporate the improved outlook across segments. We maintain our Buy rating with a revised TP of ₹880 (based on a P/E multiple of 15x FY25E EPS).