Hold Mahindra Logistics Ltd For Target Rs.383 by Prabhudas Liladhar Capital Ltd
BS strength set to improve
Quick Pointers:
* Rights issue planned to the tune of ~Rs7,500mn. If fully subscribed, 27mn shares (entitlement ratio is 3:8) will be issued at a price of Rs277 per share
* Proceeds from rights issuance will be utilized to deleverage the BS. As of 30th June, debt on books stood at ~Rs6,040mn
We increase our EPS estimates by 26%/8% for FY26E/FY27E amid interest cost reduction arising from debt repayment with the proceeds expected to be received from rights issuance. MAHLOG IN reported an in-line operating performance with an EBITDA margin of 4.7% (PLe 4.9%). While volumes in the B2B express business were up by 10% on a sequential basis, yields remained under pressure due to inferior customer mix. Nonetheless, initial signs of recovery are evident as revenue growth was in double digits with EBITDA losses narrowing to Rs118mn. However, given the competitive landscape we expect MAHLOG IN to seed EBITDA losses of Rs311mn/Rs64mn in FY26E/FY27E in the B2B express business. Retain HOLD on the stock with a TP of Rs383 as re-rating hinges on turn-around in the B2B express business. We have increased our target P/E multiple to 25x (earlier 22x) amid expected improvement in BS strength.
Top-line increased by 14.4% YoY with a GM of 13.4%: Consolidated revenue grew by 14.4% YoY to Rs16,246mn (PLe Rs16,206mn). Gross profit improved by 5.4% YoY to Rs2,172mn (PLe Rs2,415mn), with a margin of 13.4% as against a margin of 14.5% in 1QFY25.
EBITDA increased 15.0% YoY: EBITDA improved by 15.0% YoY to Rs762mn (PLe Rs794mn) with a margin of 4.7%. Other expenses declined marginally by 3.6% YoY to Rs365mn (PLe Rs470mn) thereby contributing positively to EBITDA growth. Losses after tax & MI stood at Rs108mn (PLe loss of Rs51mn) in 1QFY26.
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