Delhivery Gets 'Buy' As Motilal Oswal Initiates Coverage

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Motilal Oswal Report

Delhivery Ltd. clocked a 32% revenue CAGR during FY19-25, primarily fueled by the express parcel business. During this period, Delhivery turned Ebitda positive, reporting Ebitda of Rs 3.7 billion in FY25 (Ebitda loss of Rs 16 billion in FY29).

Going forward, we estimate the company to post a 14% revenue CAGR over FY25-28. Increasing contribution from the partial truck load express segment to support growth. We anticipate Ebitda margins to improve from 4.2% in FY25 to 7% in FY28, supported by a better cost structure in express and improved margins in the PTL business. We expect Ebitda/adjusted profit after tax CAGR of 36/52% over FY25-28.

With improved earnings, we expect its RoE to improve to 5.6% in FY28 from 1.8% in FY25. Considering the strong focus on volume growth, cost reduction, enhanced service offerings, and tight balance sheet control, we believe Delhivery is very well placed to capitalize on the growth opportunity unfolding in the express logistics sector.

We initiate coverage on Delhivery with a Buy recommendation. We value the company using DCF, arriving at our target price of Rs 480, based on a WACC of 12% and a terminal growth rate of 5% (implied EV/Ebitda of 36x on FY28).

Key risks: Slower growth in the e-commerce segment and slower-thanexpected penetration in the B2B express market.

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