IGI Logo

Core business performance marred by acquisition…

About the stock: Mahindra Logistics is an end-to-end 3PL logistics solution provider, from performing milk run to in-factory logistics, warehousing to first mile and last mile logistics.

           * Serves over 400 customers via its two-business segment: supply chain management [(SCM), 96% of revenues] and enterprise mobility

          * Revenues from Mahindra comprise 54% of SCM revenues while the rest is contributed by non-Mahindra

Q4FY23 Results: Results were below I-direct estimates on all fronts.

         * Revenues grew 17% YoY to | 1272 crore, led by growth in SCM segment • EBITDA grew 24% to | 64 crore with margins at 5% (vs. expected 5%)

         * However, PAT arrived at a loss of | 1 crore due to higher depreciation and interest expenses (related to recent acquisition in B2B space)

What should investors do? Although MLL’s core 3PL service (82% of SCM segment) is expected to remain strong on the back of higher auto sales, growing consumption in tier II/III cities; newer businesses such as B2B Express and freight forwarding are facing respective headwinds in demand and realisation, respectively

       * We await improvement in PAT margins and maintain our HOLD rating

Target Price and Valuation: We value the stock at | 410 i.e. 27x P/E on FY25E EPS.

Key triggers for future price performance: Although auto is expected to dominate the mix in the near to medium term, continued business addition in nonauto business and higher warehousing utilisation, along with cost-control measures are expected to keep MLL’s long term ambitions intact.

     * The above enables it to shift buying behaviour (more online shopping), leading to higher warehousing space requirement and 3PL relevance

     *  Asset light business model, with projected 30%+ RoCE in FY25E

Alternate Stock Idea: Apart from MLL, we remain positive on TCI Express

* TCI Express is a leading asset light B2B (95% of revenues) express logistics company with 28 sorting centres, 800+ owned pan-India centres covering 40000 pick-up and delivery points

* We have a BUY rating on the stock & value at | 2150 (35x PE on FY25E EPS)

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer