Morgan Stanley initiates coverage on Zinka Logistics with 'underperform' tag, sees 16% downside

Since its listing, Zinka Logistics Solutions shares have run up over 100 percent.

Global brokerage Morgan Stanley kicked off coverage on recently listed Zinka Logistics Solutions Ltd, giving it an underperform rating with a target price of Rs 450 per share. This indicates a downside potential of around 16 percent from the previous session's closing price.

While the brokerage recognizes Zinka's niche position and strong competitive advantages in a fragmented market, it believes the stock's recent rally, which is up 105 percent since its November 2024 listing, makes it less attractive at current levels.

At 9.22 am, shares of the firm took a tumble to trade at Rs 525.5 per share, lower by 1.6 percent on the NSE.

Zinka Logistics Solutions has carved out a solid place in the logistics space, offering a wide range of services and turning profitable with rapidly improving margins. Morgan Stanley expects the company to maintain a steady adjusted EBITDA margin of 38 percent, with incremental margins stabilizing at 60 percent by FY27.

Despite these strengths, the brokerage is cautious about the stock’s valuation. At 34 times FY27 adjusted EBITDA, Zinka is trading at the upper end of its peers, which could limit further upside.

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Morgan Stanley's outlook suggests that while Zinka has strong fundamentals and growth potential, its current price may already reflect much of that optimism. Investors are advised to take a measured approach, weighing the company's growth story against its premium valuation.

Zinka Logistics Solutions, that offers BlackBuck platform for truck operators, raised Rs 1,114.72 crore through its maiden public issue at the upper end of price band of Rs 259-273 per share. The IPO was a mix of fresh issuance of equity shares worth Rs 550 crore, and an offer-for-sale of 2.06 crore shares worth Rs 564.72 crore.

Zinka Logistics, through its Blackbuck platform, has established itself as India’s largest digital platform for truck operators, facilitating 413.34 million transactions and capturing 27.52 percent of the truck operator market as of FY24. It addresses core needs of truck operators such as tolling, fueling, fleet tracking, and load matching.

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