You missed the warning signs in TCI Express’s latest earnings—here’s why it matters now.
- Revenue rose 6% YoY to INR 3.1 bn, beating consensus, but EBITDA margin fell short of expectations.
- EBITDA climbed 16% YoY to INR 336 mn, yet margin slipped to 10.7% versus the projected 11.2%.
- SME demand recovery is cited as a volume catalyst, but mix‑shift pressures could erode profitability.
- Motilal Oswal maintains a Neutral rating with a revised TP of INR 600, based on an 18× FY28 EPS multiple.
- Sector peers are navigating similar margin compression, making relative valuation critical.
TCI Express Revenue Growth Beats Estimates
The courier‑express firm reported third‑quarter FY26 revenue of INR 3.1 bn, a 6% year‑over‑year increase and a modest 2% quarter‑over‑quarter uptick. Volume grew only 2% YoY, suggesting that price inflation contributed significantly to the top‑line lift. Management attributes the modest volume expansion to a nascent rebound in small‑ and medium‑enterprise (SME) shipments, a segment that had been depressed during the macro slowdown.
From a sector perspective, the Indian logistics market is projected to expand at a CAGR of 10‑12% through 2028, driven by e‑commerce penetration and government initiatives to improve freight corridors. TCI Express’s 6% growth is therefore slightly below the industry average, raising questions about its ability to capture market share from larger rivals like Blue Dart and DHL Supply Chain, which are aggressively expanding capacity and technology platforms.
TCI Express EBITDA Margin: What the Numbers Reveal
EBITDA for the quarter reached INR 336 mn, up 16% YoY, but the margin slipped to 10.7% versus the consensus 11.2%. The shortfall stems from a higher cost‑to‑serve mix, as the firm reports a larger proportion of low‑margin, high‑volume SME shipments. While the absolute EBITDA figure grew, the margin compression signals that cost controls are lagging behind revenue growth.
Technical note: EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a proxy for operating cash flow, stripping out financing and non‑cash items. A declining margin often precedes earnings volatility because it reduces the buffer against cost inflation.
How the Indian Logistics Sector’s Trends Impact TCI Express
Two macro trends dominate the logistics landscape: digitisation of freight matching and the shift toward last‑mile delivery in tier‑2 and tier‑3 cities. Companies that invest in technology platforms can optimise routes, reduce fuel burn, and improve asset utilisation. TCI Express has announced several contract renewals that should stabilise revenue streams, but it has lagged behind peers in adopting AI‑driven routing, which could explain the margin squeeze.
Furthermore, the resurgence of SME demand, while positive for volume, typically carries lower freight rates. The firm’s management expects the mix to improve as domestic consumption picks up, but the near‑term outlook suggests continued pressure on margins until higher‑value B2C shipments rise proportionally.
Competitor Landscape: TCI Express vs. Blue Dart, Gati, and DHL
Blue Dart, the market leader, posted a 9% YoY revenue increase with EBITDA margins holding steady at 12.3% due to its strong B2C footprint and superior technology integration. Gati, a mid‑size player, saw volume growth of 4% but suffered a 1.5% margin dip, echoing TCI’s challenges. DHL’s Indian arm continues to leverage its global network, achieving a 10% margin despite modest revenue growth.
Relative valuation therefore matters. At a forward‑PE of 22×, Blue Dart trades at a premium to TCI’s implied 18× FY28 EPS multiple, reflecting its higher margin profile. Investors must decide whether TCI’s lower valuation compensates for the risk of continued margin erosion.
Historical Earnings Patterns for TCI Express
Looking back, TCI Express experienced a similar margin contraction in FY22 when it aggressively pursued volume in the SME segment. At that time, the stock price fell 12% over two quarters before the firm re‑balanced its mix, leading to a 7% margin rebound in FY23. The pattern suggests that the company can correct course, but the turnaround typically takes 6‑9 months.
Historical data also shows that each time the firm announced a technology upgrade (e.g., the 2020 hub automation rollout), revenue growth accelerated by 3‑4% YoY while margins stabilized. This precedent reinforces the importance of operational investment for sustaining profitability.
Investor Playbook: Bull vs. Bear Cases for TCI Express
Bull Case: If SME demand continues to improve and the company accelerates its technology adoption, volume could grow at an 8% CAGR through FY28, driving EBITDA to expand at 13% CAGR. The 18× FY28 EPS multiple would then imply a fair value near INR 650, offering upside from the current INR 600 target.
Bear Case: Persistent margin compression due to low‑margin mix, coupled with rising fuel and labor costs, could push EBITDA margins below 10% for the next two years. In such a scenario, the stock may trade below INR 500, and the Neutral rating would need to be downgraded.
Investors should monitor three leading indicators: (1) quarterly volume growth in the SME segment, (2) margin trends post‑technology rollout, and (3) competitive pricing pressure from Blue Dart and DHL. A clear improvement in any of these metrics could swing the risk‑reward balance toward the bullish side.