Transport Corporation of India Ltd (TCIL)’s top-line & bottom-line for 3QFY2016
came in below our estimates. The top-line has come in flat on a yoy basis, with all
business segments posting poor performances, barring the Seaways division. On
the operating front, the company showed a slight improvement in margins.
Further, lower interest costs and tax rate boosted the overall profitability.
Muted standalone top-line performance: TCIL’s numbers for the quarter
have come in below our estimates. The top-line, at ~Rs551cr, is flat on a yoy
basis, with all business segments posting poor performances on the revenue front,
barring the Seaways divisions, which reported a growth of ~16% yoy to ~Rs35cr.
Slight improvement in operating margin and lower interest costs boost overall
PAT: For the quarter, the company reported an operating profit of ~Rs44cr, up
~5% yoy. Further, the company’s operating margin expanded by 43bp yoy to
8.0%, primarily on account of decline in operating expenses as a percentage of
sales by 207bp yoy. The net profit grew by ~11% yoy to ~Rs19cr. The growth
however is lower than our estimate, mainly due to flattish sales during the quarter.
Outlook and valuation: TCIL benefits from its pan-India scale, which gives it a
competitive advantage in the higher-margin segments of the logistics industry; as
well as from its asset-light business model which cushions its profitability in
cyclical downturns and gives it an attractive ROE profile. The company is wellplaced
to be a key beneficiary of the anticipated implementation of the GST.
However, in the last few quarters, the company has not been able to report good
numbers, both on the top-line and bottom-line fronts, due to delay in pick-up in
economic activities. Hence we are maintaining our NEUTRAL rating on the stock.

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