Buy Delhivery; target of Rs 500: ICICI Securities

BUY

ICICI Securities's research report on Delhivery

Service level EBITDA margin for Delhivery express parcel segment was ~500bps lower than what was realised in Q3FY24, despite a similar top line due to a one-off surge in intracity vehicle rental expenses (cINR 540mn differential). PTL revenue declined 3% QoQ (+22% YoY) in Q3FY25 given adverse seasonality; however, management remains confident of sustained growth next year. We believe Delhivery is a compelling buy at current valuation, given limited downside post the recent stock price correction. Also, in our view, Delhivery may be a key beneficiary of a potential pickup in e-commerce growth as income tax cuts take effect from FY26. This is not being recognised at present and could positively surprise investors. We, therefore, maintain TP of INR 500 and re-iterate BUY.

Outlook

We maintain BUY on the stock with target price of INR 500, as per DCF methodology. The implied EV/EBITDA at our TP is 34x FY27E/27x FY28E. Key risks: 1) Pricing pressure in express parcel or PTL business; and 2) medium-term growth visibility worsening due to global headwinds.

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