Buy Mahindra Logistics Ltd For Target Rs. 504 by Prabhudas Liladhar Capital Ltd
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MAHLOG IN reported better-than-expected performance in 4QFY26 as revenues increased 14.1% YoY to Rs17,914mn (PLe Rs17,841mn) with an EBITDA margin of 6.3% (PLe 5.3%). PAT surpassed Rs200mn mark (PLe Rs76mn; CE Rs89mn) for the first time since 4QFY19 led by strong operating performance. We believe MAHLOG IN is showing signs of turnaround led by transformation in the B2B express division. Amid steps taken to optimize the linehaul cost, improve lane utilization levels and expand the network coverage we expect B2B express business to report revenue CAGR of 17.0% over the next 2 years with EBITDA margin of 2.5%/3.5% in FY27E/FY28E respectively. Entry into new categories is likely to drive growth in contract logistics business while white space reduction (absorption of 0.3mn sq ft in 4QFY26) should aid margins. Consequently, we expect revenue CAGR of 13.0% over the next 2 years with EBITDA margin of 6.4%/6.6% in FY27E/FY28E respectively. We change our valuation methodology to EV/EBITDA as rental disclosures have begun and value the stock at 14x pre-IND AS EBITDA of FY28E to arrive at a TP of Rs504 (implied PE of 28x on pre-IND AS EPS of Rs18.1 for FY28E). Retain BUY.
Top line increased by 14.1% YoY with a GM of 14.3%:
Consolidated revenue grew by 14.1% YoY to Rs17,914mn (PLe Rs17,841mn, CE Rs18,127mn) driven by strong performance across segments and higher volumes from anchor client M&M. Gross profit improved by 21.6% YoY to Rs2,563mn (PLe Rs2,455mn) with a margin of 14.3% as against a margin of 13.4% in 4QFY25 led by operational efficiencies, improved client mix, and turnaround in the B2B express business. Revenues for contract logistics/B2B express segment rose 12.1%/48.7% YoY to Rs13,814mn/Rs1,386mn while GM improved to 11.3%/4.8% respectively in 4QFY26.
EBITDA margin of 6.3% with PAT crossing Rs200mn mark for the first time since 4QFY19:
EBITDA increased 44.6% YoY to Rs1,124mn (PLe Rs948mn, CE Rs994mn) with a margin of 6.3% (PLe 5.3%) compared to a margin of 5.0% in 4QFY25. EBITDA for contract logistics segment rose 24.1% to Rs1,062mn while EBITDA loss for the B2B express business narrowed to Rs25mn in 4QFY26. PAT stood at Rs202mn (PLe Rs76mn, CE Rs89mn) as against a loss of Rs68mn in 4QFY25.
Con-call highlights:
1) Supply chain management/Mobility business contributed 94%/6% of total revenue.
2) MAHLOG IN reduced whitespace by ~0.3mn sq ft in 4QFY26, with a target to substantially eliminate excess white space by Sept’26.
3) The growth in B2B express segment was supported by mid-teens volume jump and higher realizations, driven by favourable client mix and selective yield corrections rather than blanket price hikes.
4) MAHLOG IN plans incremental investments in technology in FY27E after a relatively lower investment phase over the past two years, to further strengthen operational capabilities.
5) Freight forwarding segment is witnessing near-term headwinds due to geopolitical disruptions impacting global trade flows.
6) Sequential GP improvement in the B2B express business was notable, with gross contribution increasing from Rs27mn in 3QFY26 to Rs66mn in 4QFY26, driven by better yields, higher volumes, improvement in client mix, and cost discipline.
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