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Business News/ Markets / Stock Markets/  Delhivery share price: Key triggers to dictate performance of this logistic stock

Delhivery share price: Key triggers to dictate performance of this logistic stock

Although the company's net loss widened year-on-year in Q4FY23, the positive takeaways from the quarter were positive EBITDA, high incremental gross margin, and improved volume growth sequentially.

In the March 2023 quarter, Delhivery registered a net loss of  ₹159 crore and revenue of  ₹1,860 crore.Premium
In the March 2023 quarter, Delhivery registered a net loss of 159 crore and revenue of 1,860 crore.

Online parcel services provider, Delhivery's fourth quarter numbers for FY23 have likely triggered a re-rating for the stock. Delhivery witnessed a healthy performance sequentially with adjusted EBITDA and volume growth stealing the show in Q4FY23. However, Delhivery has seen significant improvement in the last 2 to 3 quarters which brokerages believe should assuage investors. Not just analysts are optimistic about Delhivery's share price and have recommended buying.

On Monday, Delhivery's share price ended flat at 361.45 apiece on BSE. The stock traded in the range of an intraday high and low of 369.80 apiece and 341.05 apiece.

In Q4FY23, Delhivery posted a net loss of 159 crore. Although this net loss widened from 119.9 crore in Q4FY22, it narrowed against a loss of 195.7 crore loss in the previous quarter (October-December 2022). Also, revenue dipped by 10% YoY to 1,860 crore, but sequentially the company saw a growth of 2%. The company's operating margins improved to 0.3% in the January-March period.

In their research note, analysts at Kotak Institutional Equities said, "Delhivery reported an in-line quarter on adjusted EBITDA, benefiting from improving qoq volumes and high incremental gross margin. It highlighted improving market share in e-commerce logistics and position of strength in incremental PTL business contracts. The key positive surprise for us and for Delhivery was the pace at which its hubs are growing to the scale concomitant to start tractor trailers."

Read here: BPCL Q4 results: OMC beats estimates, standalone PAT rises 159%; key highlights of earnings

Somewhat similarly, ICICI Securities analysts note said, "in Q4FY23, Delhivery reported positive EBITDA margin for the first time since listing. Though the quantum of EBITDA profitability is not significant from a valuation context, the steady improvement over the last 2-3 quarters is a positive development." It added, this should assuage investors and could trigger a re-rating for the stock.

Delhivery's express parcel delivery volumes at 180mn (up 17% YoY ex-Shopee), as per ICICI Securities note, were a positive surprise and it reinforces management commentary that has continued to gain volume share in Q4FY23 in the express parcel delivery segment.

It further said, "While growth concerns in the e-commerce business remain, we think the steady improvement in market share proves that Delhivery is providing a superior product compared to peers. Also, management sounded confident that even if captive logistics arms are opened up for 3PL use, it is unlikely to impact their market position. We think steady improvement in PTL volumes should help to drive profitability further over the medium term. Maintain BUY."

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On the valuation, Kotak's note said, "We lower our volume estimates by 3-4%, compensated by an offsetting increase in adjusted EBITDA margin of ~20 bps. We also raise our medium-term margin estimates, factoring in a reduction in corporate overheads to ~7% of sales over the next five years versus 5% guidance over time by Delhivery. We roll forward to a higher Rs410 FV versus Rs395."

Meanwhile, ICICI Securities report said, "We value Delhivery using time discounted forward EV/EBITDA multiples. We discount EV calculated at 20xFY26E EV/EBITDA (at 20% discount rate) to arrive at our price target of Rs425."

Among key risks for Delhivery would be pricing pressure in the express parcel or PTL business; and medium-term growth visibility worsens due to global headwinds.

Year-to-date, Delhivery's stock has gained nearly 9% on BSE. But in six months, the stock has posted nearly 11% upside.


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.



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Updated: 22 May 2023, 10:04 PM IST
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