Target: ₹940

CMP: ₹

We downgraded TCI Express (TCIE) to Neutral (from Buy) in Oct’24 after Q2-FY25 results, due to concerns over volumes and profitability. TCIE’s business performance and volume growth have been impacted by additional cost pressures in the Air Express division, increased competition, and slower growth in key sectors such as manufacturing, automobiles, and textiles.

As per our channel check, volume growth was muted in Oct-Nov’24, which could lead to a weak performance in Q3-FY25 as well for TCIE. Allcargo Gati, an express logistics peer of TCIE, reported a 13 per cent m-o-m, decline in volumes in Nov’24 (2 per cent growth y-o-y).

During Oct-Nov’24, Gati reported just a 3 per cent YoY growth in volumes, signalling subdued demand in 3QFY25 so far. While the festive season in Q3 brought some q-o-q volume growth for express logistics companies, their y-o-y performance remains weak, and this trend is expected to persist through the rest of FY25.

While the long-term outlook for surface express services remains positive, near-to-medium-term headwinds such as heightened competition, weak rural demand, a consumption slowdown, and elevated inflation are likely to weigh on volumes.