Neutral Mahindra Logistics; target of Rs 510: Motilal Oswal

Motilal Oswal's research report on Mahindra Logistics

MAHLOG reported a revenue growth of ~28% YoY to INR13.3b in 2QFY23 (12% above our estimate). Revenue growth was driven by a recovery in the Auto industry and consumption-end markets, including Telecom. EBITDA margin stood at 5.1% in 2QFY23 (up 55bp YoY, but down 40bp QoQ). EBITDA grew by ~45% YoY to INR676m. APAT increased by ~130% YoY to INR122m (16% below our estimate). Margin was impacted by the inflationary environment, increase in frontline manpower costs, and supply shortages of trailers and car carriers in 2QFY23. The supply chain recorded a revenue of INR12.6b (up 29% YoY) and an EBIT margin of 5.4% (down 70bp YoY and 120bp QoQ). Enterprise Mobility reported a revenue of INR629m (up 15% YoY) and an EBIT margin of 5.9% (up 150bp YoY, but down 100bp QoQ). We expect the momentum in volumes to continue, led by a strong outlook for key end-use verticals.

Outlook

We have revised our FY23/FY24 EPS estimate lower by 13%/2% to factor in its weak margin performance in 2QFY23 and cost pressures. We expect MAHLOG to clock a revenue/EBITDA CAGR of ~24%/34% over FY22-24E. We maintain our Neutral rating, with a revised TP of INR510/share (35x FY24E EPS).

For all recommendations report, click here