Shares of Delhivery rose to its highest level since listing on the BSE after the firm announced its March quarter (results). The stock, which made its market debut on May 24, 2022, has risen nearly 27 percent to hit its new high of ₹617 in intra-day deals on June 2 as against its issue price of ₹487.
However, despite the surge, brokerages remain mixed on the stock post its Q4FY22 results. While domestic brokerage IIFL Securities has initiated coverage on the stock with a 'sell' call, Credit Suisse remains optimistic on the stock and has initiated coverage with an 'outperform' recommendation for the stock.
IIFL Sec has given a target price of ₹442 for the stock, indicating a downside of 22.5 percent from June 2's close of ₹570.45. Meanwhile, Credit Suisse has a 12-month target price of ₹675 for the stock, indicating an upside of over 18 percent from yesterday's close.
The Gurugram-based firm announced its first quarterly results since listing on Monday, reporting a net loss of ₹119.8 crore in the March quarter. However, its revenue from operations doubled to ₹2,071 crore during the period from ₹1,031 crore a year ago.
Its adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) came in at ₹72 crore in Q4FY22. The company expects to turn cash flow positive over the next six to eight quarters.
According to IIFL Securities, the valuations are building-in seamless execution, which seems challenging. The stock's risk-reward remains unfavourable, it said, suggesting investors to await a better entry point.
"We initiate coverage on Delhivery with SELL, as valuations seem to be building in the seamless strategy execution, of rapidly scaling-up revenues, containing costs, cutting yields and yet turning profitable in a sustainable manner. We like the company's focus on automation, scale and vigour for growth, but believe it is walking a tight rope, given the execution challenges," IIFL explained.
Meanwhile, Credit Suisse 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.
The brokerage further highlighted that it prefers Delhivery to other internet peers, on (1) no customer acquisition cost; (2) diversified growth (e-commerce + broader logistics) and (3) cheaper valuation for same growth play.
CS estimates an over 29 percent revenue CAGR over FY22-25 with profitability expansion to 5.5 percent by FY25.
Meanwhile, IIFL Securities sees Delhivery's FY22-25 sales growing at a CAGR of 27 percent, with gradual improvement in the cost-to-income ratio.
"Niche logistics sector-players have similar asset-light models, but compete on differentiated services vs on price alone and, hence, record 10-15 percent Ebitda margin. With 85 percent of overall costs being variable, it needs to be seen how Delhivery intends to improve its operating efficiency, gain leverage, pass on the chunk of such gains to consumers, and yet log a meaningful Ebitda margin in the absence of any significant price increase," IIFL explained.
The initial public offering (IPO) of the supply chain company was subscribed 1.63 times on its final day of subscription. Delhivery provides a full range of logistics services, including express parcel delivery, heavy goods delivery and warehousing.
