Buy TCI Express target of Rs 819: ICICI Securities

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ICICI Securities research report on TCI Express

Our analysis of TCI Express’ (TCIE) annual report highlights: i) possible improvement in revenue per branch going forward given the 12% decline witnessed in FY20. While number of branches increased by ~100 YoY to reach 800 in FY20, we look at the possibility of the number crossing 1,200 in the medium term. ii) Higher employee costs and higher other expenses mainly on account of significantly increased rentals impacted the margin trajectory in FY20. TCIE has been able to slightly increase the EBITDA margin YoY despite these cost headwinds, on the back of 210bps increase in gross margins.

Outlook

While revenue growth will ensure that the ratio of employee costs to revenues gets normalised, the current pandemic offers an opportunity to reverse the trend of increasing rentals. iii) Analysis of receivables shows a judicial customer mix. iv) Relatedparty transactions stay limited. Maintain BUY.

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