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Delivering the goods

Operation beat exhibits underlying network strength

Delhivery (DELHIVER IN) saw its first-ever profitable quarter (PAT at INR 117mn). Consolidated revenue rose 20% YoY to INR 22bn with Express, Part Truck Load (PTL) and Truck Load (TL) up >20%, but offset by the dip in supply chain/cross-border services. EBITDA was a record high of INR 1.1bn (margin at 5%) versus INR 0.7bn YoY loss. Robust network in peak festive season helped meet demand (spike customers), yielding operating leverage edge. 9M revenue rose 13% to INR 60bn. EBITDA margin was 1.3% versus (8.7%) YoY. Net loss shrunk to INR 1.8bn from INR 8.5bn YoY.        

Favorable positioning in key segments

(a) Express parcel (64% of 9M revenues) saw an 18% volume growth to 201mn shipments, 2% realization growth to INR 72/shipment on festive season demand, higher-weight shipment, spiked delivery distance on own tractors, thus better yields. Market share gains continued in direct-to-consumer, small-medium-enterprises and customer-to-customer. The segment may grow at 15-20%, eclipsing ~15% growth for e-commerce. Development of captive logistics by large platforms do not pose risk (as network/economies of scale). (b) PTL volume (18% of 9M revenue) grew 37% to 3,54,000 tonnes on a low base. Expect growth to sustain higher than industry average of higher single-to-low double-digits, by capturing share from unorganized via better engineering/ tech.

Scale-led cost optimization benefits

Margin rose on: (a) better yield (customer mix, high weight shipment); (b) cost optimization via lower line haul cost (32% of revenues) on dynamic routing, better tractor trailer utilization (63-64%; from 20%) and warehouse consolidation into larger spaces. So, service timeline, delivery efficiency improved.

Valuation: Upgrade to Buy; TP raised to INR 570

Integrated infrastructure, continued demand capturing in top 20-cities are edges. Though festive season push may normalize near term, focus is on market share gain, network utilization. We up profitability estimate – may turn PAT positive by FY26E (FY27E earlier). Upgrade to Buy (from Reduce) with raised DCF-TP of INR 570 (from INR 405) discounted at 13% WACC, 6% terminal growth, implied target EV/sales of 3.8x FY26E.

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