Neutral Mahindra Logistics; target of Rs 725: Motilal Oswal

Motilal Oswal's research report on Mahindra Logistics

We released our Logistics thematic report recently, wherein we have stressed on the growth potential of the Indian logistics sector and the upcoming opportunities for value added services players like Mahindra Logistics (MLL). We had assigned a Neutral rating to MLL, due to: a) near to medium term growth challenges in the Auto sector, b) owing to its rich valuation. The Auto sector has been facing challenges due to semiconductor shortages, which is impacting Auto production and the requirement for Logistics activity. However, non-Auto verticals like Consumer and e-commerce are expected to do well with an improved demand outlook. The easing of fuel prices (on account of excise duty cuts) will comfort margin. Over the long term, we expect MLL to benefit from a pickup in industry growth, growing need for integrated solutions, and MLL’s strong presence in the 3PL segment.

Outlook

We expect it to clock a revenue/EBITDA/PAT CAGR of ~18%/32%/58% over FY21-24E. The stock currently trades at 36x FY24E EPS. We retain our Neutral rating, with a TP of INR725/share (40x FY24E EPS).