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ICICI Securities
Mahindra Logistics (Buy)
Target: ₹572
CMP: ₹507.25
Bajaj Electricals Limited (BEL) and Mahindra Logistics (MLL) have announced they have signed a contract for innovative logistics optimisation and outsourcing.
The deal is a complete end-to-end redesign and outsourcing of BEL’s entire logistics by MLL, with the twin objective of achieving enhanced and industry-best service levels, coupled with a logistics cost saving in excess of 25 per cent.
The total contract value of this deal will be in excess of ₹1,000 crore over the next five years (over ₹200 crore p.a). Margins, we believe, can be in the 9-10 per cent range given the typical mix of warehousing and transportation involved in any end-to-end supply chain management contract.
More importantly, the deal signals the way forward for an integrated logistics service provider like MLL and MLL’s potential for further large ticket deal wins.
MLL best placed to incrementally win wallet share of customers. Focus is on: i) integrated service platforms, ii) multimodal offerings, iii) operational excellence to drive cost competitiveness, and iv) technology platforms (for transport management, warehouse management, integrated site management) to help service delivery is showing in an increasing trend of order wins favouring integrated services.
Maintain Buy with an unchanged target price of ₹572/share.
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