Accumulate Mahindra Logistics Ltd for the Target Rs. 386 By Prabhudas Liladhar Capital Ltd
B2B express business shows early signs of revival
We cut our EPS estimates by 27%/9% for FY26E/FY27E post addition of warehousing space that is likely to escalate rental cost and elevate depreciation and interest charge amid migration to IND AS 116 (refer exhibit one for variation in depreciation & interest expense versus PLe). MAHLOG IN reported a mixed set of results with EBITDA beat of 7.7% led by narrowing losses in B2B express business. We believe B2B express business is showing early signs of revival with volumes increasing by 7.2% combined with yield improvement of Rs0.9 in 2QFY26. Having achieved a 20%+ absorption in white space during 2QFY26, MAHLOG IN intends to lease out the balance unoccupied area by Sep-26. We expect revenue CAGR of 15% over FY25-FY28E with EBITDA margin expansion of 160bps over the next 3 years. Given healthy growth prospects and strengthening of BS post rights issue, we maintain ACCUMULATE with a TP of Rs386 (23x Sep-27 EPS; no change in target multiple).
Top-line increased by 10.8% YoY with a GM of 14.2%: Consolidated revenue grew by 10.8% YoY to Rs16,853mn (PLe Rs17,549mn). Gross profit improved by 11.5% YoY to Rs2,389mn (PLe Rs2,352mn), with a margin of 14.2% as against a margin of 14.1% in 2QFY25.
EBITDA increased 28.2% YoY but bottom-line continues to be in red: EBITDA improved by 28.2% YoY to Rs851mn (PLe Rs790mn) with a margin of 5.0% (PLe 4.5%) compared to a margin of 4.4% in 2QFY25. Beat at EBITDA level was on account of narrowing losses in B2B express business. Despite healthy operating performance, MAHLOG IN reported loss before MI of Rs83mn (PLe PAT of Rs17mn) as against a loss of Rs96mn in 2QFY25. Miss at the bottom-line level was due to higher-than-expected interest/depreciation expense of Rs217mn/Rs717mn (PLe Rs187mn/Rs650mn) respectively.
Con-call highlights: 1) ~95% reduction in whitespace is aimed by Sep-26E. 2) MLL plans to infuse Rs500mn in MLL Express to support its path to profitability. 3) B2B express segment reported 7.2% YoY growth in tonnage with a higher VAS share. Realization improvement by ~90 paise was seen led by better customer mix and exit from low-yielding business. 4) In the mobility segment, a premium techenabled B2C service “Alyte Prive” has been launched with plans to expand to Noida International Airport and thereby strengthen presence in the NCR region. 5) A 3 lac sq ft facility at Nashik was launched recently while expansion of 4 lac sq ft happened at Guwahati and Agartala in Oct-25. 6) Debt has been reduced to Rs725mn in 1HFY26 via proceeds received from rights issue. 7) Warehousing revenue stood at Rs3,330mn in 2QFY26, up from Rs2,780mn in 2QFY25. 8) Revenue contribution of Auto/Mahindra Group stood at 58%/54% respectively in 2QFY26. 9) A one-time provision of Rs48mn was made for client bankruptcy in 2QFY26, though the exposure has not been fully provided for. 10) RoU assets rose to Rs5,537mn as of Sep-25, driven by addition of warehousing space taking the total managed area to over 22.1 mn sq ft. 11) Depreciation expense increased 32.8% YoY to Rs717mn in 2QFY26, largely driven by escalation in lease cost amid migration to Ind AS 116, but is expected to remain stable in coming quarters as warehousing expansion is largely complete.
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