Neutral Mahindra Logistics; target of Rs 380: Motilal Oswal

Motilal Oswal's research report on Mahindra Logistics

Mahindra Logistics (MLL)’s 3QFY24 revenue grew ~5% YoY to INR13.9b (6% below estimates). EBITDA margin came in at 3.7% (vs. est. of 4.4%) in 3QFY24 (down 100bp YoY and down 20bp QoQ). EBITDA declined ~17% YoY to INR522m (vs. est. of INR646m) during the quarter. The company posted a net loss of INR212m in 3QFY24 vs. APAT of INR14m in 3QFY23 (our loss estimate was INR3m). The company’s EBITDA and PAT were adversely impacted by MLL Express’s weak performance (Rivigo B2B express business) and high tax outgo. The division reported elevated EBITDA loss of INR224m in 3QFY24. Due to high competition and slower volume growth, the express business continued to report elevated loss at operating level. MLL now expects EBITDA breakeven by end-1HFY25 and PAT breakeven by the end of FY25 for the MLL Express business (Rivigo).

Outlook

We cut our EBITDA margin estimates for FY24/FY25/FY26 by 30bp/20bp/10bp to factor in the extended losses in the express business. We expect MLL to clock a revenue/EBITDA CAGR of 17%/18% over FY23-26. We reiterate our Neutral rating with a revised TP of INR380 (premised on 22x FY26E EPS).