Target: ₹500
CMP: ₹403.80
Delhivery’s Q4-FY24 print signifies the benefit of operating an integrated logistics platform, as seasonality the express business (-16 per cent q-o-q) was partially offset by continued improvement in part truckload freight (PTL) (+10 per cent q-o-q) along with the profitability trend upholding.
Though Express volumes — in light of the insourcing of logistics by Meesho — may remain pressured in the short term, Delhivery’s focus on ramping up other businesses in addition to incremental gross margins hovering at about 40 per cent in the Transportation business should bode well for profitability.
Delhivery’s integrated offerings, tech investments, and scale advantages have allowed it to gain market share in the PTL segment along with fortifying its leadership position in the 3PL Express market. With focus on ramping up other businesses like supply chain services, Delhivery will not only diversify its revenue streams but strengthen its moat of being the lowest cost operator, in our view. Factoring in the advent of in-sourcing by a key customer in the Express segment, we cut our revenue/EBITDA by 1/5 per cent and 2/8 per cent in FY25E/26E, respectively.
We, however, continue to expect the company to turn PAT positive in FY25, as tapering capex intensity and net cash balance sheet help soften the blow on volumes in the short term.