Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TCI Express Ltd (NSE:TCIEXP, Financial) is making substantial strides in strengthening its multimodal business, aiming to increase its contribution to 20%-22% of total revenue over the next 2-3 years.
- The recent automation of the Pune Sorting Center has significantly boosted operational efficiency in Western India, with plans to extend this automation to other centers.
- The company has launched a Money Back Guarantee scheme, setting a new standard in the express delivery industry by guaranteeing on-time delivery.
- TCI Express Ltd (NSE:TCIEXP) has been recognized as a Great Place to Work for the fourth consecutive year, demonstrating a positive work environment.
- The company remains debt-free with a robust balance sheet, maintaining a strong financial position.
Negative Points
- Quarterly results showed a decline in volumes and margins due to market fluctuations, increased costs, and adverse weather conditions.
- Higher interest rates, labor costs, and inflation have impacted customers, leading to lower utilization levels.
- The logistics sector faced challenges due to general elections and temporary declines in volumes.
- The company's EBITDA margin declined by 25% and PAT level by 28% year-on-year due to increased costs and reduced volumes.
- Airline consolidation and increased airport charges have significantly impacted operating costs, contributing to a 250 basis point increase in overall costs.
Q & A Highlights
Q: The margins have come off quite a lot despite a small decline in volumes. Can you provide some color on what has happened and the volume figure for this quarter?
A: The volume for this quarter was 235,000 tonnes, representing a 2% year-on-year decline. The margin decline is due to reduced truck utilization and increased costs, including higher airline prices and airport charges. We are working on compensating this by targeting higher revenue from SME customers and expanding our multimodal network.
Q: With the current demand environment, do you see margins staying at current levels, or can they bounce back quickly to 14% plus?
A: The margin decline is temporary. We expect margins to return to 14% plus from Q2 onwards, driven by pre-festive season volume uptick and operational efficiencies.
Q: What is the current contribution of Air Express to the overall revenue, and how does it compare to last year?
A: Air Express, including both domestic and international, contributes around 7-7.5% of the overall revenue, similar to last year.
Q: Given the decline in surface B2B Express, what challenges are we facing, and how do we compare with industry peers?
A: Surface Express has only declined by 1.5%. The overall industry is facing similar challenges. We are focusing on strengthening our multimodal business and creating separate sales teams to drive growth.
Q: Can you provide more details on the Money Back Guarantee scheme and its impact on costs?
A: The Money Back Guarantee scheme was launched mid-quarter to boost customer confidence. It is primarily used by small customers and has not significantly impacted costs.
Q: Are there any further price hikes anticipated to pass through increased costs?
A: We do not anticipate significant price hikes due to the ongoing challenges faced by customers. We might achieve a 50-100 basis point increase in prices for the remainder of the year.
Q: What is the growth outlook for the West region, and which sectors are performing well?
A: The West region has grown by 1-1.5%, while the South has declined by 5%. The North region remains flat. The auto sector and parts of the pharma sector are performing well.
Q: How do you plan to achieve double-digit growth for FY25, given the current challenges?
A: We are focusing on strengthening our multimodal business, adding new branches, and creating vertical-specific sales teams. These initiatives are expected to drive double-digit growth for the year.
Q: What is the contribution of the Rail Express business to the overall revenue?
A: Rail Express currently contributes around 2-2.5% of the overall revenue.
Q: Are we shifting focus from Express to multimodal logistics?
A: No, the focus remains on Express logistics, which provides higher margins. We are expanding our multimodal capabilities to complement our Express services.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
