Shares of Delhivery jumped 15% to 617 rupees on BSE in Thursday’s trade after global broker Credit Suisse hedged the stock with an ‘outperform’ rating and a target price of 675 rupees.
With that, the stock has gained 18.6% over the past three days. The logistics service provider’s stock was trading at its highest level since its IPO on May 24, 2022.
At current levels, Delhivery is 27% above its issue price of Rs 487 per share. The title had reached a low of Rs 474 on the day of its debut.
Credit Suisse’s rating on the stock is based on a favorable sector structure, the company’s structural growth in e-commerce volumes, recent breakeven, with incremental growth synergistically driving profitability, and its strong fluke in terms of scale, indicates the note.
“The sector is ripe for profitability gains after Delhivery’s recent break-even point. We prefer it to other internet peers on no customer acquisition cost, diversified growth and cheaper valuation for the same growth game,” he said.
The brokerage estimates that the company will report a 29% CAGR in addition to revenue in FY22-25.
While announcing its March 2022 (Q4FY22) quarter results, Delhivery said the majority of the company’s investments in FY22 were for capacity and capacity building in the form of capex ( approximately 7% of revenue in FY22) and inorganic growth, in addition to investments in working capital.
These investments are expected to drive scale and improve efficiency – lowering the cost of delivery and reducing delivery time, the company had said.
Delivery’s express parcel volumes grew 101% in FY22, far outpacing industry volume growth of around 40%, he added.
The logistics major had raised Rs 5,235 crore through its initial public offering (IPO) to use Rs 2,000 crore of the proceeds in funding growth initiatives, Rs 1,000 crore towards inorganic growth through acquisitions or strategic alliances and the remainder Rs 1,000 crore for general corporate purposes.
The company, which is the largest integrated logistics player by revenue, sees steady growth in India’s logistics sector, as well as market share gains in the organized space.
Meanwhile, for Q4FY22, Delhivery recorded a loss of Rs 119.68 crore, slightly higher than the loss of Rs 118 crore the company reported in the same quarter last fiscal year. On the upside, its revenue for the latest quarter doubled from a year earlier to Rs 2,072 crore, from Rs 1,003 crore in Q4FY21.
For the full financial year ending in 2022, the logistics technology company’s net loss ballooned to Rs 1,011 crore from Rs 415.7 crore the previous year. Its revenue, meanwhile, rose by 89% to Rs 6,882 crore for the year. CLICK HERE FOR THE FULL REPORT
“Despite cash earnings, cash flow from operations has declined significantly. In addition, the frequent use of Adjusted EBITDA and Adjusted Cash Earnings makes it difficult to comment on actual profitability. We therefore recommend investors to wait a few quarters to analyze the evolution of the business in terms of revenue growth and profitability,” said Parth Nyati, founder of Tradingo.
First published: Thursday 02 June 2022. 13:00 IST