Accumulate Delhivery; target of Rs 489: Prabhudas Lilladher

Prabhudas Lilladher's research report on Delhivery

We have subsumed E-com express into our P&L from 2QFY26 as this was the maiden quarter of consolidation. As a result, our valuation framework and estimates have undergone significant changes. Refer section titled “Key changes in estimates & valuation” in our report for more details. Adjusting for the integration cost charge of Rs900mn arising from acquisition of E-com express, DELHIVER IN’s operating performance was better than our estimate with EBITDA margin of 6.2% (PLe 5.9%). Improvement was driven by turn-around in SCS division with service EBITDA margin of 12.9%. However, service EBITDA margin of B2C parcel division expanded by just 20bps YoY to 15.1% and operating leverage benefit was not evident as yields were down 6.7% YoY to Rs65.5 given average weight per parcel on E-com’s network is comparatively lower. In addition, PTL division’s service EBITDA margin also witnessed a sequential dip to 8.5% as fixed cost absorption was weak amid delay in shipments post changes in GST rates. Nonetheless, service EBITDA margin of B2C parcel division is expected to revert to ~16-18% mark by end of FY26E. PTL division’s service EBITDA margin is also expected to mimic B2C parcel division over the next 2 years.

Outlook

Overall, we expect sales CAGR of 14% over the next 3 years with EBITDA margin of 5.1%/9.4%/10.2% in FY26E/FY27E/FY28E and maintain ACCUMULATE with a TP of Rs489 (38x SepFY27E EBITDA; no change in target multiple).