Foreign brokerage CLSA has cut its target price on Delhivery Ltd even as logistics firm reduced its losses to more than half in the September quarter, thanks to a less-than-expected growth in revenues and a fall in Ebitda sequentially. The fresh CLSA target stands Rs 493 compared with Rs 550 earlier, as the brokerage lowered its revenue estimates for FY24-25 by 3.2 per cent. The target still suggests a 22 per cent potential upside over Monday’s closing price of Rs 403.15.
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CLSA said revenue Delhivery’s sales growth was 3.6 per cent below of its estimate, led by a 7.6 per cent YoY increase in the express parcel segment and a 45.6 per cent YoY increase in parts truck load revenue but offset by a decline in supply chain and cross border segment revenue. Express parcel shipment volume increased 12.4 per cent YoY ahead of peers, it said adding that per shipment revenue declined 4.3 per cent YoY driven by the product mix.
“Revenue growth in the express parcel and parts truck load businesses were quite strong in 2QFY24, despite muted growth in the industry, but an increase in costs led to lower-than-expected Ebitda; we believe its Ebitda margin will continue improving as scale increases,” it said.
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CLSA retained its ‘BUY’ rating on the stock as it is positive on the long-term growth of the express parcel business.
“We believe consensus is underestimating the operating leverage in the business as revenue scales up, and we are significantly higher on our Ebitda margin assumptions for FY26 than consensus,” it said.
Meanwhile, Delhivery’s management indicated double-digit growth in both the ecommerce and PTL businesses in October. Profitability should increase further as revenue scales up, CLSA said. The management also indicated the company is on track to achieve Ebitda breakeven in FY24 and PAT breakeven in FY25.
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For the September quarter, Delhivery‘s net loss narrowed 59 per cent to Rs 103 crore while sales were up 8.1 per cent at Rs 1,941.7 crore.
