 "Delhivery")
Logistics company Delhivery made its first ever net profit in the third quarter of financial year 2023-24 (Q3FY24), helped by robust revenue and operating leverage. It reported a bottom line of Rs 19.5 crore compared to a loss of Rs 194.5 crore in the year-ago quarter. Delhivery had ended FY23 with a loss of Rs 1,007 crore and brokerages expected the company to post its first quarterly net profit in FY25.
Nuvama Research said Delhivery’s net profit is a milestone that was expected in the first half of FY25 (H1FY25).
Delhivery reported a 20 per cent year-on-year growth in revenue to Rs 2,194 crore in Q3FY24, led by express parcel and part truck load (PTL) segments. Express parcel accounted grew 18 per cent to 201 million shipments and PTL segment grew at 37 per cent to 354,000 tonnes on a low base.
What boosted revenues in the express segment was that the festive season played out completely in the quarter unlike last year. On a sequential basis, growth came in at 11 per cent with realisation gains of 7.6 per cent.
The realisation uptick was seasonal driven by higher weight shipments (white goods proportion) and longer distances traversed leading to better yields.
Growth in the express segment is expected to grow at 15-20 per cent and is expected to be higher than the 15 per cent growth for e-commerce.
Delhivery’s PTL segment is expected to grow more than the industry average in the long term as the company seeks to get a higher share from the unorganised sector by using better technology.
The company made an operating profit of Rs 109.4 crore in Q3FY24, compared to a loss of Rs 73 crore in the year-ago quarter. Operating profit margins came in at 5 per cent (the year ago was a loss). The profit was on account of improved customer mix and higher weight shipments. Cost optimisation through dynamic routing and better tractor trailer utilisation of the company’s own fleet rather than vendors helped in margin improvement too.
Sachin Dixit and other analysts at JM Financial Research said Delhivery’s Q3 performance could be volatile due to capacity expansion plans and industry swings, but the logistics company’s management expects incremental gross margins on transportation business to sustain around 50 per cent in the near term.
Elara Securities said while the festive season push may normalise near term, Delhivery’s focus is on market share gain and network utilisation.
The brokerage has increased its profitability estimate and upgraded the stock to ‘buy’ from ‘reduce’ and believes that the company may turn net profit positive by FY26 as compared to earlier estimates of FY27.
Nuvama Research has a hold rating for Delhivery as it believes that the margin improvement is already priced in. While the company turning net profit positive earlier could boost sentiment for the stock, 5-7 per cent margins in FY25-26 and 8-10 per cent margins later are already built in.
As a result, even on an FY28 basis (25 times enterprise value to operating profit), the fundamental upside is limited, said Alok P Deshpande and Sayam Vanigota of the brokerage.
