On Monday, BofA Securities revised its price target for Delhivery (NS:DELH) Ltd (DELHIVER:IN), a logistics and supply chain company, to INR372.00 from the previous INR460.00. The firm kept its Neutral rating on the stock unchanged.
Delhivery's second-quarter financial results showed a year-over-year revenue increase of 13%, aligning with projections. However, the company's profitability fell short of expectations.
The adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) reached Rs 100 million, representing a margin of 0.5%. Express parcel volume saw a modest 2% year-over-year increase.
The contraction of service EBITDA margins was attributed to the company's investments in capacity expansion ahead of the anticipated peak season in the third quarter. Delhivery's management is focusing on strategies to enhance growth, including efforts to boost the company's market share even in a potentially sluggish e-commerce environment.
Delhivery plans to introduce a third-party (3P) shared quick-commerce network for e-commerce brands, which is expected to increase volumes in major cities. Additionally, the company is in the process of launching expedited products for regional surface and national air shipping, aiming to capture an incremental market share.
Despite the overall market's slow momentum, Delhivery's management expressed during the conference call their intent to pursue growth opportunities.
Following the second-quarter performance, BofA Securities has adjusted its FY25/26 earnings per share (EPS) projections for Delhivery and reduced the target multiples in its Sum of the Parts (SOTP) valuation.
The multiples for the express parcel segment have been decreased to 2.5 times from 3 times, and for the Part Truck Load (PTL) segment to 3 times from 4 times.
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