Buy Delhivery Ltd for the Target Rs.580 by Motilal Oswal Financial Services Ltd
Well-positioned to capture the volume shift amid sector consolidation
We interacted with the management of Delhivery to gain insights into the evolving trends across the Express and PTL segments as well as the growth outlook. Below are the key highlights from our discussion:
* In the Express logistics segment, management expects industry consolidation to continue, with cash-burning players likely to exit or rationalize operations, leading to volume redistribution toward stronger, well-capitalized operators. The PTL market is also undergoing structural redesign, as customers increasingly shift toward faster, more reliable express PTL offerings from organized players, moving away from traditional economy models characterized by longer transit times and limited service assurance.
* The logistics industry has also transitioned from a fragmented, low-efficiency ecosystem to a technology-driven, service-oriented model, supported by rising ecommerce penetration and increasing customer expectations for faster, more reliable deliveries. In this evolving landscape, Delhivery has positioned itself as a leading integrated logistics platform by embedding technology across its operations. Its automated capacity management system dynamically redirects volumes from congested nodes to underutilized ones, optimizing network utilization and supporting higher service margins.
* Delhivery has emerged as one of the structurally strongest and most scalable platforms in the sector, combining rapid volume-led growth with improving profitability. The company turned APAT positive in FY25 and delivered robust performance in 3QFY26, fueled by strong volume growth and healthy margins in the core transportation segment. The acquisition of Ecom Express further enhances scale, lifts market share to an estimated 20–25%, and strengthens network density and operating leverage.
* Looking ahead, we estimate the Express segment revenue to clock a 16% CAGR over FY25–28, aided by healthy e-commerce volumes and industry consolidation, whereas margin expansion is likely to be driven by operating leverage and favorable product mix. The PTL segment offers significant headroom, with organized players handling less than 25% of industry volumes; we project a 17% revenue CAGR over FY25–28, led by SME and retail expansion, yield improvement, and increasing adoption of value-added services.
Strategic inorganic expansion to strengthen market leadership and network advantage
* The INR14b acquisition of Ecom Express (completed in Jul’25) consolidates Delhivery’s leadership in express parcel logistics and adds a complementary rural network, strengthening its reach and customer base. This integration is likely to drive network density gains, footprint rationalization, and cost synergies.
* With rural and Tier 2-4 cities forming a substantial share of e-commerce volumes, the acquisition deepens Delhivery’s competitive moat against peers. The combined entity is positioned to gain share as 3PL players benefit from rising cost pressures on captive logistics arms and industry-wide pricing normalization.
* The company remains open to pursuing inorganic growth opportunities, subject to reasonable valuations, as it believes it has the capability to absorb incremental revenues efficiently and scale them at relatively higher margins.
Strong momentum in express and PTL underpins earnings visibility
* The express segment continues to witness robust growth, supported by ongoing industry consolidation and rising shipment volumes. Service EBITDA margins are improving, aided by operating leverage and a favorable low-weight product mix. We project a 16% revenue CAGR in the express segment over FY25–28, underpinned by strong e-commerce volume growth during the same period.
* The PTL segment remains a fragmented market with less than 25% of volumes handled by organized players. Following the Spoton integration, Delhivery has demonstrated consistent outperformance through wide geographic coverage, faster turnaround times, and tech-driven process optimization. We project a 17% CAGR in PTL revenue over FY25–28, underpinned by SME and retail segment expansion, yield improvement, and the adoption of value-added services.
* The Supply Chain Services (SCS) segment is scaling profitably by exiting unprofitable contracts while benefiting from the increasing formalization of warehousing, GST-led network redesign, and demand for integrated multilocation solutions like the ‘Prime’ service.
Margin expansion in the core business drives capital efficiency
* We expect Delhivery’s EBITDA margin to expand to 8.5% in FY28 from 4.2% in FY25, supported by operating leverage, improved asset utilization, and technology integration across the value chain. Management expects PTL’s service EBITDA margin to reach 16–18% in the next 2-3 years (from ~11% in 3QFY26), while the express parcel service’s EBITDA margin is likely to be sustained at ~18% (vs. ~18% in 3QFY26) and above due to network optimization.
* Capital intensity is moderating, with major network buildout being completed and steady-state capex expected to decline to ~4-5% of revenue by FY28. A strong balance sheet with negligible debt offers significant headroom for strategic capex and acquisitions.
Valuation and view
* Delhivery remains well-positioned for future growth, driven by strong momentum in its core transportation businesses and a disciplined focus on profitability. With steady volume growth and healthy service EBITDA margins in both the Express Parcel and PTL segments, the company is well-placed to sustain margin strength going ahead.
* The integration of Ecom Express is set to enhance network efficiency and reduce capital intensity, while new services like Delhivery Direct and Rapid offer long-term growth potential in on-demand and time-sensitive logistics.
* We expect the company to report a sales/EBITDA/APAT CAGR of 14%/44%/ 54% over FY25-28. We reiterate our BUY rating with a DCF-based TP of INR580.
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