Delhivery shares fall despite first-ever quarterly profit; Here's what hurting the stock

Shares of Delhivery Ltd gave up early gains and dropped sharply during the trading session on Monday despite the logistics solutions provider reporting its first ever quarterly profit in the December 2023 quarter. However, the brokerage firms continue to remain neutral on the stock even after swinging to black.

Delhivery reported a consolidated net profit of Rs 11.2 crore for the quarter ended December on the back of improvement in earnings, against a loss of Rs 196 crore a year ago. Consolidated revenue from operations grew 20.3 per cent year-on-year (YoY) to Rs 2,194 crore.

Delhivery's Ebitda came in at Rs 109 crore in the third quarter of the current financial year, against an Ebitda loss of Rs 72 crore in the year ago period. Its express parcel shipments witnessed a robust growth of 18 per cent YoY, with shipment volume rising to 201 million in Q3 FY24.

Delhivery beat Q3FY24 growth expectations—revenue shot up 20 per cent YoY versus 16-18 per cent estimates—and the resultant operating leverage gains hauled up both reported EBITDA and PAT into green. While we expected reported EBITDA to be positive, the PAT turning green is a meaningful positive—a milestone that we expected to occur in H1FY25E, said Nuvama.

"Express Parcel and PTL both grew strongly; as a result, service EBITDA margin came through at 14 per cent. Profits advancing by two quarters is commendable, but Street has already built in that from H2FY25E; hence upside to the fair value shall be limited. This coupled with the recent stock price spike impels us to retain 'hold' with a revised target price of Rs 450," it added.

Shares of Delhivery surged about 3 per cent to Rs 488.05, hitting its 52-week highs, on the opening tick on Monday, only to give up early gains and drop 6 per cent to Rs 460.15 during the session. The scrip had settled at Rs 472.90 in the previous trading session on Friday.

Shares of Delhivery have surged about 15 per cent in the last one week, while the counter has rallied more than 22 per cent in the last one month period. The stock has rallied about 66 per cent from its 52-week low at Rs 294.90 hit about a year ago.

Delhivery’s results delivered stronger adjusted EBITDA with gross margin on incremental transport revenues clocking 50 per cent rate and corporate expenses being flat yoy. Q3 was another proof of Delhivery’s business model showing margin improvement with growth in contrast to the weakening profitability of e-commerce peers in times of good growth, said Kotak Institutional Equities.

"We increase our fair value by 25 per cent to Rs 510, building in higher growth and profitability in base case, growing probability of scenario of meaningful share gains for Delhivery through declining relevance of third-party peers and/or higher outsourcing by captives and roll-forward, per cent it added while downgrading the stock to 'add' post the recent rally.

Delhivery reported its first ever EBITDA and PAT positive quarter with corporate overheads being stable despite increased revenue. Festive led ecommerce growth resulted in 18 per cent volume growth with realisations improving thanks to mix. PTL business remained stable in Q3 with marginal sequential growth, said JM Financial.

Supply chain services segment still awaits revenue growth despite adding some marquee customers over the past 2 quarters. Improved operating leverage due to tight cost control led to adjusted EBITDA, it added, maintaining a 'hold' rating on the stock with a target price of Rs 430.

"Going forward, this profitability trend could be volatile as Q3 is likely to be high watermark as well as due to capacity expansion plans or uncertain industry swings but management expects incremental gross margins on transportation business to sustain around 50 per cent in the near-term," JM Financial said.

 

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