Mahindra Logistics’ (MLL) Q3FY24 EBITDA was significantly below our and street’s expectations. Key points: 1) Express business continued its underperformance with EBITDA-level loss of INR 224mn; 2) EBITDA in contract logistics declined, despite the increase in revenue, mainly due to underutilisation on lower-than-expected festive demand; 3) freight forwarding business was impacted by industry headwinds; and 4) the Board has approved additional equity of INR 500mn to support operations and growth. Taking cognisance of 9MFY24 performance, we trim our FY24E / FY25E EBITDA by 12.2%/25.8% and roll over valuation to FY26E numbers.
OutlookHowever, we maintain the multiple at 32x, given the possibility of a sharp improvement in profitability and returns by FY25E/FY26E as ongoing initiatives bear fruits. We downgrade the stock to HOLD with a revised target price of INR 395/share (earlier INR 390/share).
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