Neutral Mahindra Logistics; target of Rs 330 : Motilal Oswal

Motilal Oswal's research report on Mahindra Logistics

Mahindra Logistics (MLL)’s 2QFY24 revenue grew ~3% YoY to INR13.6b (in line). EBITDA margin came in at 3.9% (vs. est. of 5.1%) in 2QFY24 (-117bp YoY and -120bp QoQ). EBITDA declined 21% YoY to INR536m (vs. est. of INR718m) during the quarter. The company posted a net loss of INR159m in 2QFY24 vs. APAT of INR122m in 2QFY23 (our PAT estimate was INR29m). Weak operating performance and high tax outgo impacted PAT adversely during 2QFY24. The company’s EBITDA and PAT were hit by MLL Express’s weak performance (Rivigo B2B express business). The division reported an operating loss of INR244m during 2QFY24. A slower-than-expected volume recovery in the express business led to higher operating loss on a QoQ basis. MLL now expects EBITDA breakeven by end-FY24 (earlier target of 3QFY24). We cut our EBITDA margin estimates for FY24 and FY25 by 40bp and 20bp, respectively, to factor in the extended losses in the express business.

Outlook

We expect MLL to clock a revenue/EBITDA CAGR of 18%/19% over FY23-25. We reiterate our Neutral rating with a revised TP of INR330 (premised on 26x FY25E EPS).