Mahindra Logistics Q1 Results Review - Weakness In The Rivigo Business Mars Performance: Motilal Oswal

Motilal Oswal Report

Mahindra Logistics Ltd.'s Q1 FY24 revenue grew ~8% YoY to Rs 12.9 billion and was in line with our estimate. Ebitda was flat YoY at Rs 666 million (versus estimate of Rs 667 million).

Ebitda margin stood at 5.2% (versus estimate of 5.0%) in Q1 FY24 (-30 basis points YoY and +15 bp QoQ).

The company reported a net loss of Rs 85.5 million in Q1 FY24 versus adjusted profit after tax of Rs 135 million in Q1 FY23 (our estimate of loss was at Rs 2 million). Profit after tax was hit by higher interest costs and tax outgo.

Mahindra Logistics’ Ebitda and profit after tax were hurt by the weak performance in Rivigo express business. The unit reported an Ebitda loss of Rs 185 million during Q1 FY24.

The supply chain management segment posted a revenue of Rs 12.1 billion (+6% YoY) and Ebit of Rs 22 million during the quarter. Although some end-markets experienced a slowdown, Mahindra Logistics witnessed positive traction in the third-party logistics, mobility, and last mile businesses through increased order intake and expanding customer accounts. 

Enterprise mobility services reported revenue of Rs 795 million (+39% YoY) and operating loss of ~Rs 17 million in Q1 FY24. The mobility business is witnessing a spike in airport-based services, primarily driven by higher travel activities and a pick-up in employee transportation management. 

We expect Mahindra Logistics to clock a revenue/Ebitda compound annual growth rate of 20%/26% over FY23– 25E.

As volumes in the integrated business-to-business express business improve, we believe that losses will start to ebb as the focus of the management continues to be on cost optimisation while increasing the scale of operations.

We marginally cut our profit after tax estimate for FY25 and reiterate our 'Neutral' rating with a revised target price of Rs 370 (premised on 22 times FY25E earnings per share).

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