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Transport Corporation of India (TCI) posted a record performance for Q3FY22, robust on all parameters. Among key segments, revenue from Seaways/Freight rose 43%/4% year-on-year (YoY). Overall EBITDA margin came in healthy at 13%, led by the Seaways segment.

Motilal Oswal has maintained its Buy rating on the multibagger stock with a revised target price of 880 per share. The brokerage expects rising contribution from the high margin Seaways segment and improving share in the less than truckload (LTL) business in the Freight division to support margin performance.

Another brokerage Edelweiss is bullish on TCI on it’s improving business mix, which along with a diversified business portfolio should attain sustainable growth over the next three-four years. Management remains upbeat on demand and expects SCM to pick up in the coming quarters, it highlighted.

“Despite a strong rally, TCI still trades at 16x one year PE, providing reasonable valuation comfort. We raise our FY22/FY23E earnings by 7%/9%. Retain ‘Buy’ with a revised target price of 875 (from 758)," it added.

The brokerage's investment rationale for TCI is based on the improvement in its underlying business mix over the next three–four years. The company is targeting higher-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 log 15% plus CAGR over the next five-seven years. 

"TCI also plans to add capacity in its seaways division (now pushed to FY23), which should aid margin improvement and RoCE. Overall, TCI’s focus on establishing multi-modal capabilities will reflect in its growth over the next four–five years," Edelweiss' note added.

Shares of TCI have rallied over 183% in a year's period whereas the stock is down about 3% in 2022 so far (year-to-date or YTD).

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

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