After declining nearly 20 percent from its 52-week high of ₹617.70, hit on June 2, 2022, the logistic stock Delhivery can see further downside going ahead.
The stock witnessed a muted listing on the bourses on May 24, 2022, at ₹493. Delhivery rose around 25 percent in the first 7 sessions post listing, however, since then, the stock has been on a consistent downtrend. Currently, it is just 2 percent above its issue price.
The brokerages remain divided on the stocks.
While brokerages ICICI Securities and Goldman Sachs initiated overage on the stock with a 'hold' rating and target prices of ₹484 and ₹540, respectively. Credit Suisse has an outperform call on the stock with a target of ₹675, indicating an upside of 35 percent.
ICICI Securities, in a recent note, suggested that Delhivery’s B2C-heavy business model has a potential profit pool of ₹6,300 crore in India by FY26E. The brokerage's base case assumes Delhivery may capture about 25 percent of the same, it added.
The brokerage forecasts a PAT of ₹940 crore and ₹1,570 crore by FY25 and FY26, respectively for the logistics firm. A higher share of the profit pool by Delhivery is upside potential, whereas slower than expected execution will be the key downside risk, it further said. ICICI also sees the significant scope of operating leverage in the firm with global best practices in distribution, sorting and consolidation likely streamlining processes. It is important to note that ICICI's target price for the stock is below its IPO issue price of ₹487.
Meanwhile, Goldman Sachs said that it sees Delhivery as a profitable e-commerce growth proxy with scale benefits. The company would reap higher margins from increased outsourcing of first and last-mile operations, it added.
Earlier in June, IIFL Securities also had initiated coverage on the stock with a sell rating and a target price of ₹442 on the stock, implying a downside of 11 percent. The stock's risk-reward remains unfavourable, it said, suggesting investors to await a better entry point.
Credit Suisse, on the other hand, is bullish on the stock on the back favourable industry structure and structural growth (over 30 percent) in e-commerce volumes. Further, strong moat and leadership in extant scale, network and technology, diversified growth (e-commerce + broader logistics) and potential merit as an internet play vs others are also some other key positives, added CS.
It estimates an over 29 percent revenue CAGR over FY22-25 with profitability expansion to 5.5 percent by FY25.
Delhivery is the largest and the fastest-growing fully-integrated logistics services player in India by revenue as of FY22. It provides supply-chain solutions to a diverse base of 23,613 active customers such as e-commerce marketplaces, direct-to-consumer e-tailers and enterprises and various SMEs.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
