Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TCI Express Ltd (BOM:540212, Financial) maintained stable margins and consistent capacity utilization despite operational challenges.
- The company recommended a final dividend of INR2 per share, bringing the total dividend for FY24 to INR8 per share, a 400% payout on the face value.
- Significant interest and growth in the Rail Express segment, with over 125 routes now operational.
- Successful implementation of AI-enabled automation at the Pune sorting center, enhancing operational efficiency and reducing errors.
- Recognition and awards for sustainability and excellence, including a gold rating in the LEEDv4 BD+C Warehouses and Distribution Centres rating system and being named the best B2B logistics partner by Royal Enfield.
Negative Points
- Volume growth for Q4 FY24 was negative, with a 2% decline year-over-year.
- Overall revenue growth for FY24 was muted, with only a 1% increase compared to the previous year.
- Challenges in the consumption sector, particularly in textiles and electronics, impacted overall growth.
- The company faced high inventory levels among B2B customers, leading to reduced dispatches and lower volumes.
- Despite investments in technology and infrastructure, the company did not achieve significant top-line growth, raising concerns about market share and competitiveness.
Q & A Highlights
Q: Can you share the volume number for the fourth quarter and the full year and how it was YoY in the fourth quarter?
A: The tonnage number for this quarter is exactly 258,000 tonnes, which is almost 2% negative compared to the same quarter last year. For the full year, we achieved 1 million tonnes.
Q: What is happening at the ground level, given the muted growth in FY24? How do we see FY25 panning out and our long-term guidance on revenues?
A: The ground level consumption has been hit due to high prices and cash being pulled out of the market. We expect about 10% to 12% growth in FY25. Profitability will remain the same, with efforts to increase it by 100 basis points.
Q: Which industries have seen a decline in volumes?
A: Manufacturing has been growing, but consumption has not. Sectors like textiles and electronics have not been growing. High prices have reduced consumption levels globally. Once interest rates ease, we expect improvement.
Q: Are you losing market share due to premium pricing?
A: No, the entire industry is facing challenges. Our pricing is not a concern as freight charges are less than 1% of product value. Our service levels are top in the industry, and we are not losing market share.
Q: What is the proportion of total freight contributed by railways and other services in Q4 and FY24?
A: The proportion of total freight contributed by railways is around 17.5% to 18% for both Q4 and the full year FY24.
Q: What is the outlook for growth over the next 5 to 10 years? Have we taken any price decreases due to lower diesel rates?
A: We aim to grow at 2 times the GDP. Margins will improve by 50 to 100 basis points as volumes increase. We have not decreased prices due to lower diesel rates; any price changes are positive arbitrage for us.
Q: Are there any specific sectors expected to perform better in FY25?
A: We expect growth in engineering goods and pharma sectors. We are also focusing on the defense and solar sectors due to government initiatives.
Q: What is the mix of SME customers in our revenues currently?
A: Currently, the mix is around 50% big customers and 50% SME customers. We maintain this balance intentionally.
Q: What are the plans for the remaining CapEx of INR300 crores?
A: The CapEx will be used to automate sorting centers in Ahmedabad, Kolkata, Mumbai, and Chennai. Construction will start this year in Ahmedabad and Kolkata, with completion expected by 2026.
Q: What is the capacity utilization this quarter and how do you expect it to change going forward?
A: Capacity utilization this quarter was around 83.5%. We aim to reach 85% to 86% in the near term and 88% to 89% in the longer term, without compromising service levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
