Buy Delhivery Ltd for the Target Rs. 500 by Motilal Oswal Financial Services Ltd

Positioned for scalable growth; eyes margin expansion and network synergies
Solid performance across key segments
* Delhivery reported a 6% YoY increase in revenue to INR22.9b in 1QFY26. EBITDA surged 53% YoY to INR1.5b, resulting in an improved EBITDA margin of 6.5%.
* Adjusted PAT came in strong at INR911m, up 53% YoY, supported by margin expansion and disciplined cost management.
* Delhivery’s core transportation segment, comprising Express Parcel and Part Truckload (PTL), saw healthy volume growth (Express Parcel: +10% YoY and PTL: +15% YoY), supported by improved services and network utilization. Service EBITDA margins for Express Parcel/PTL stood at 16.3%/10.7%, underscoring Delhivery’s operational efficiency and scale advantages.
* Performance in the supply chain services (SCS) and cross-border businesses remained muted primarily due to strategic exits from unprofitable contracts and weak seasonal demand in select verticals.
* Delhivery delivered a strong 1QFY26 performance despite seasonal weakness, with robust volume growth in Express Parcel (+14% YoY) and PTL (+15% YoY) and improved service EBITDA margins. New services such as Delhivery Direct and Rapid are scaling up, while the Ecom Express acquisition is set to boost network synergies and lower capex intensity. With improvement in service EBITDA margins and an improved outlook, we raise our EBITDA estimates for FY26/FY27/FY28 by 19%/12%/5% and expect Delhivery to report a CAGR of 14%/38%/53% in sales/EBITDA/APAT over FY25-28E. Reiterate BUY with a revised TP of INR500 (based on DCF valuation).
Core transportation businesses driving profit-accretive growth
*Express Parcel and PTL segments remain key drivers of core growth and profitability for Delhivery. Express Parcel revenue grew 10% YoY to INR14b, with shipment volumes increasing 14% YoY to 208m parcels. The segment reported a healthy service EBITDA margin of 16.3%, reflecting strong network efficiency and operational discipline.
* PTL revenue rose ~17% YoY to INR5b, with tonnage growing 15% YoY to 0.46mmt. PTL profitability improved markedly, with Service EBITDA margins expanding to 10.7% (up from 3.2% in 1QFY25), driven by yield improvement, value-added services, better utilization of capacity, and operating leverage from automation.
* The combined transportation business (Express + PTL) delivered a robust Service EBITDA margin of 14.8% in a seasonally weak quarter, with pricing discipline, route optimization, and consistent investments in high-capacity fleet and integrated gateways.
Strengthened strategic position through asset optimization and acquisition
*Delhivery has demonstrated capital discipline and strategic clarity in recent quarters. The company has completed major capex investments during FY22-25, i.e., expanding its trucking fleet from 299 to 1,741 vehicles and building megagateways in Tauru, Bhiwandi, and Hoskote. As a result, capital intensity has declined from 6.8% of revenue in FY22 to 5.2% in FY25, with expectations of further moderation to ~4% of revenue by FY28.
* The Ecom Express acquisition, approved in Jun’25, strengthens Delhivery’s network footprint and gives it access to automation equipment and high-quality infrastructure.
Highlights from the management commentary
* Delhivery expects more than 20% annual growth in PTL tonnage, supported by rising demand for express PTL services, better fulfillment economics for clients, and further penetration into SME and retail segments across underserved geographies.
* Express Parcel and PTL segments continue to deliver healthy service EBITDA margins, and the company is targeting 16-18% steady-state margins across both businesses in the next two years.
* Delhivery is selectively exiting unprofitable contracts while targeting INR18-20b in Supply Chain revenue, with service EBITDA margin of 12% and RoCE of 20% in three years, driven by a growing enterprise pipeline and white-labeled “Prime” offerings.
* Delhivery is building long-term optionality through targeted investments in new service lines like Delhivery Direct (on-demand intra-city and inter-city logistics) and Rapid (dark store-led same-day fulfillment). Delhivery Direct is launched in three major cities—Ahmedabad, Delhi NCR, and Bengaluru.
Valuation and view
* Delhivery is well-positioned for future growth, supported by strong momentum in its core transportation businesses and a clear focus on profitability. With Express Parcel and PTL segments delivering consistent volume growth and healthy service EBITDA margins, the company expects to sustain 16-18% margins over the next two years.
* The integration of Ecom Express is set to enhance network efficiency and reduce capital intensity, while new services like Delhivery Direct and Rapid offer longterm growth potential in on-demand and time-sensitive logistics.
* We expect Delhivery to report a CAGR of 14%/38%/53% in sales/EBITDA/ APAT over FY25-28E. Reiterate BUY with a revised TP of INR500 (based on DCF valuation).
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