Mahindra Logistics Limited’s (MLL) Q2FY25 EBITDA performance undershot our/consensus estimates by 6.2%/23.6%. Key points: 1) Network services, which is ~18% of overall business, grew 46.1% YoY while 3PL grew by 6.8%. 2) Gross margins improved for network services; however, it has declined to 10.4% in 3PL (11% in Q1FY25) due to unabsorbed white space (~1.1mn sq.ft.) and addition of contractual manpower for peak season. 3) MLL shall infuse INR 500mn to support the cash burn at Rivigo; it needs ~35–40% volumes growth to achieve EBITDA break even, and target to become EBITDA positive by Q4FY25, which seems daunting.
OutlookGiven the H1FY25 performance, we reduce our FY25E/FY26E EPS by 61.5%/6.8% and maintain REDUCE with a revised target price of INR 420 (earlier INR 450).
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