TCI Express Q2 FY26: Profit Recovery Masks Persistent Revenue Decline and Margin Pressure

The stock has reacted negatively to the broader performance trends, declining 31.35% over the past year and trading at ₹679.60 as of November 6, 2025—some 31.92% below its 52-week high of ₹998.30. Whilst quarterly profit growth offers a glimmer of hope, persistent revenue headwinds, margin compression, and a negative financial trend have pushed TCI Express into bearish territory, with the company's proprietary investment score standing at just 37 out of 100.

The September quarter results present a study in contrasts for India's express logistics sector. Whilst TCI Express managed to arrest the sequential profit decline witnessed in the previous quarter, the company's year-on-year performance continues to disappoint. Net sales of ₹308.53 crores represent the third consecutive quarter of year-on-year revenue contraction, with the company unable to regain the momentum seen in previous fiscal years. The half-yearly performance for H1 FY26 shows net sales of ₹595.28 crores, down from ₹604.52 crores in H1 FY25—a 1.53% decline that underscores the persistent demand challenges facing the business.

Financial Performance: Sequential Recovery Fails to Offset Annual Decline

TCI Express's Q2 FY26 financial performance reveals a company caught between short-term operational improvements and longer-term structural challenges. Net profit of ₹23.91 crores represents a welcome 22.80% sequential improvement from Q1 FY26's ₹19.47 crores, driven primarily by better operating leverage and margin expansion. However, the year-on-year comparison paints a less flattering picture, with net profit down 4.09% from ₹24.93 crores in Q2 FY25.

The revenue trajectory remains concerning. Net sales of ₹308.53 crores in Q2 FY26, whilst up 7.60% sequentially, declined 0.97% year-on-year. More troublingly, the company's revenue has contracted for three consecutive quarters on a year-on-year basis, with Q1 FY26 seeing a 2.13% decline and Q4 FY25 witnessing a 3.10% drop. This persistent top-line pressure suggests underlying demand weakness in the express logistics sector that management has yet to adequately address.

Operating margins excluding other income improved to 10.86% in Q2 FY26 from 9.80% in Q1 FY26, representing a 106 basis point sequential expansion. However, this remains significantly below the 11.82% achieved in Q2 FY25 and far removed from the robust 14.14% margin posted in Q4 FY24. The year-on-year margin compression of 96 basis points reflects rising cost pressures that have eroded the company's pricing power. For the full fiscal year FY25, operating margins stood at just 10.30%, down sharply from 14.90% in FY24—a deterioration of 460 basis points that highlights the severity of the margin pressure.

The profit after tax margin of 7.75% in Q2 FY26, whilst improved from the previous quarter's 6.79%, remains below the 8.00% achieved in the year-ago period. Employee costs have remained relatively stable at ₹35.57 crores in Q2 FY26 compared to ₹35.29 crores in Q2 FY25, suggesting that wage inflation has been contained. However, the company's inability to translate this cost discipline into stronger bottom-line growth points to pressures elsewhere in the cost structure, likely related to fuel costs, vehicle maintenance, and infrastructure investments.

Operational Challenges: Deteriorating Returns and Quality Concerns

Beyond the quarterly numbers, TCI Express faces deeper operational challenges that have resulted in a downgrade of its quality assessment from "Good" to "Average" as of August 2025. The company's return on equity has weakened considerably, with the latest ROE standing at just 11.22%—down from an average of 14.96% over recent years. This decline in capital efficiency reflects the dual pressures of lower profitability and expanding capital base, with shareholder funds growing to ₹764.41 crores in FY25 from ₹703.97 crores in FY24.

Whilst the company maintains a robust return on capital employed averaging 33.06%, the latest ROCE figure of 16.87% represents a significant deterioration from historical levels. This metric, which measures how efficiently the company generates profits from its capital base, has compressed due to both lower operating profits and increased capital deployment. The company's five-year sales growth of 6.81% and EBIT growth of just 4.13% underscore the challenge of generating organic growth in an increasingly competitive logistics landscape.

On a more positive note, TCI Express maintains a pristine balance sheet with zero long-term debt and a net cash position. The company's debt-to-EBITDA ratio is classified as "Net Debt is too low" and its net debt-to-equity stands at -0.20, indicating a net cash position. This financial conservatism provides a cushion during challenging periods and offers flexibility for strategic investments. However, the company's inability to deploy this capital effectively—as evidenced by declining returns—raises questions about management's capital allocation priorities.

Industry Context: Navigating a Challenging Logistics Environment

TCI Express operates in India's express cargo distribution sector, providing services through road, rail, air, and water modes. The company's infrastructure includes 28 state-of-the-art sorting centres, over 500 express routes, 2,500 feeder routes, 970+ branches, and a fleet of 5,500+ GPS-enabled containerised trucks. Despite this extensive network, the company has struggled to maintain growth momentum in recent quarters, suggesting broader headwinds in the logistics sector.

The express logistics industry in India has faced multiple challenges, including fluctuating fuel prices, increased competition from both established players and new entrants, and changing customer expectations around delivery speed and reliability. The shift towards e-commerce logistics has intensified competition, with many players offering aggressive pricing to capture market share. TCI Express's revenue contraction over the past three quarters suggests the company may be losing market share or facing pricing pressure in its core segments.

The company's operating cash flow of ₹118.00 crores in FY25, down from ₹136.00 crores in FY24, reflects the operational challenges. This decline in cash generation, despite a relatively stable profit base, points to working capital pressures and potentially higher capital intensity in the business. The company invested ₹91.00 crores in capex during FY25, suggesting ongoing infrastructure expansion, but the question remains whether these investments will translate into improved returns given the current demand environment.

Peer Comparison: Premium Valuation Without Commensurate Performance

TCI Express trades at a significant premium to most of its peers in the transport services sector, with a price-to-earnings ratio of 31.48x and a price-to-book value of 3.42x. This valuation appears stretched when compared against operational performance and peer metrics, particularly given the company's current challenges.

Whilst TCI Express commands a higher ROE of 14.96% compared to most peers (excluding TVS Supply Chain's anomalous 0% figure), its P/E multiple of 31.48x appears expensive relative to VRL Logistics (20.13x) and Gateway Distriparks (11.99x). The company's price-to-book ratio of 3.42x is the highest in the peer group, second only to TVS Supply Chain's 3.09x, yet TCI Express lacks the growth trajectory to justify such a premium.

The company's dividend yield of 1.18% is modest and below that of VRL Logistics (1.86%) and Gateway Distriparks (3.08%), offering limited income appeal to investors. With a dividend payout ratio of 25.38% and the latest dividend of ₹2 per share, there is room for increased shareholder returns, but management appears to be prioritising capital retention—though the effectiveness of this strategy remains questionable given the declining return metrics.

Valuation Analysis: Attractive Grade Belies Fundamental Concerns

Despite the operational challenges and deteriorating financial trends, TCI Express currently carries a "Very Attractive" valuation grade as of November 6, 2025. This assessment appears to be driven primarily by the stock's significant decline from its 52-week high of ₹998.30 to the current price of ₹679.60—a fall of 31.92%. However, investors must question whether this price correction adequately reflects the fundamental deterioration in the business.

The company's enterprise value-to-EBITDA multiple of 20.48x and EV-to-EBIT of 25.03x remain elevated by historical standards and peer comparisons. These multiples suggest the market continues to price in expectations of a recovery that has yet to materialise. The EV-to-sales ratio of 2.04x is reasonable for a logistics company, but only if margins can be restored to historical levels—a prospect that appears increasingly uncertain given the persistent pressure on operating profitability.

The stock's distance from its 52-week high of 31.92% and 17.14% above its 52-week low of ₹580.15 suggests significant volatility and uncertainty around the company's near-term prospects. The valuation grade has oscillated between "Attractive" and "Very Attractive" multiple times in recent months, indicating market indecision about the stock's fair value. Investors should note that a "Very Attractive" valuation grade does not automatically translate into a buying opportunity—particularly when fundamental trends remain negative and the company's competitive position appears to be eroding.

Shareholding Pattern: Stable Promoter Base, Weak Institutional Interest

TCI Express's shareholding pattern reveals a stable promoter base but declining institutional confidence. Promoter holding stood at 69.46% as of September 2025, down marginally by 0.08 percentage points from the previous quarter. This high promoter stake provides stability but also limits free float and potentially constrains liquidity.

More concerning is the weak institutional presence. Foreign institutional investors hold a mere 0.85% of the company, up marginally from 0.81% in the previous quarter but down significantly from 1.74% in September 2024. This near-absence of FII interest suggests international investors remain unconvinced about the company's growth prospects or risk-reward profile.

Mutual fund holdings declined to 9.36% in September 2025 from 9.73% in June 2025, marking a reduction of 37 basis points. Whilst domestic mutual funds maintain a meaningful stake with six funds holding positions, the sequential decline indicates some institutions are reducing exposure. Insurance company holdings have dwindled to a negligible 0.02%, down from 0.15% a year ago, signalling a clear vote of no confidence from this typically patient investor category.

The increase in non-institutional holdings to 20.31% from 19.90% suggests retail investors may be accumulating shares at lower levels, potentially viewing the valuation correction as an opportunity. However, the overall institutional holding of just 10.23% remains concerningly low for a company of this size and market capitalisation, suggesting sophisticated investors see limited value at current levels despite the price correction.

Stock Performance: Severe Underperformance Across All Timeframes

TCI Express's stock performance has been dismal across virtually all timeframes, with the company severely underperforming both the Sensex and its sector peers. The stock has declined 31.35% over the past year compared to a 3.65% gain in the Sensex, resulting in negative alpha of 35.00 percentage points. This underperformance has been consistent and severe, reflecting growing investor concerns about the company's growth trajectory and competitive positioning.

The longer-term picture is even more troubling. Over three years, TCI Express has declined 62.18% whilst the Sensex has gained 36.69%—a staggering negative alpha of 98.87 percentage points. The stock has also underperformed its transport services sector by 12.89 percentage points over the past year, with the sector declining 18.46% compared to TCI Express's 31.35% fall.

From a technical perspective, the stock remains in a "Mildly Bearish" trend as of November 3, 2025, having previously been in a "Bearish" trend. The stock trades below all key moving averages—5-day (₹685.17), 20-day (₹679.44), 50-day (₹699.35), 100-day (₹713.35), and 200-day (₹713.54)—indicating persistent downward pressure. The immediate support lies at the 52-week low of ₹580.15, whilst resistance is clustered around the ₹680-₹715 zone.

The stock's beta of 1.35 indicates it is significantly more volatile than the broader market, amplifying both gains and losses. With a one-year volatility of 34.22% compared to the Sensex's 12.45%, TCI Express falls into the "HIGH RISK LOW RETURN" category—an unattractive combination for most investors. The negative Sharpe ratio further underscores the poor risk-adjusted returns the stock has delivered.

Investment Thesis: A Deteriorating Business Model

TCI Express's investment thesis has deteriorated significantly over the past 18-24 months, with multiple red flags emerging across valuation, quality, financial trends, and technical indicators. The company's Mojo score of 37 out of 100 places it firmly in "SELL" territory, with the recommendation to "consider selling" and "look for exit opportunities."

The key concerns limiting the score are substantial: the stock remains in a bearish technical trend, financial trends are negative, long-term growth has been anaemic (sales growth of 6.81% and EBIT growth of 4.13% over five years), and the stock has consistently underperformed the benchmark across all meaningful timeframes. The company's quality grade downgrade from "Good" to "Average" reflects the fundamental deterioration in business performance.

Whilst the valuation appears "Very Attractive" following the significant price correction, this alone is insufficient to warrant investment. Value traps are characterised by seemingly cheap valuations that fail to recover because the underlying business continues to deteriorate—a risk that appears very real for TCI Express. The company's inability to grow revenues, defend margins, or maintain return on equity suggests structural challenges rather than temporary headwinds.

Outlook: What Lies Ahead

TCI Express faces a challenging road ahead, with limited near-term catalysts for a meaningful recovery and multiple risks that could further pressure the business. The company's ability to navigate the current environment will depend on its success in stabilising revenues, defending margins, and demonstrating that recent quarters represent a trough rather than a new normal.

The express logistics sector in India faces structural headwinds from intensifying competition, pricing pressure, and evolving customer requirements. TCI Express must demonstrate it can adapt to these changes and regain growth momentum. Until clear signs of stabilisation emerge—particularly in revenue trends and margin trajectory—the risk-reward profile remains unfavourable for investors.