Hold Mahindra Logistics; target of Rs 399: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mahindra Logistics

We cut our FY26E/FY27E EPS estimates by ~9% as we fine tune our interest expense assumptions. Mahindra Logistics Ltd’s (MLL) operating performance was broadly in-line with our estimate with EBITDA margin of 4.6% (PLe 4.7%) led by decent performance in the 3PL business. However, the turnaround in B2B express business (losses of Rs248mn/Rs736mn in 3QFY25/9MFY25) continues to remain a cause of concern. While management expects EBITDA break-even in 2 quarters, incremental volumes of ~6-7K tons per month would be required to achieve the same. We believe this could be challenging given the overall demand scenario and prevailing competitive landscape. In addition, unabsorbed white space has increased to ~1.5mn sq ft making fixed cost absorption a challenge unless demand revives soon.

Outlook

We expect sales CAGR of 14.0% over FY25E-FY27E with an EBITDA margin of 4.8%/5.6%/6.0% in FY25E/FY26E/FY27E. We assign HOLD (earlier “Under Review”) rating on the stock with a TP of 399 (20x FY27E EPS) given the ongoing challenges in B2B express business.