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In-line performance; improved Express performance enhances EBITDA

* Mahindra Logistics (MLL)’s 4QFY24 revenue grew by ~14% YoY to INR14.5b (in line). EBITDA margin came in at 3.9% (in line), down 100bp YoY and up 20bp QoQ. EBITDA decreased 11% YoY to INR566m (in line). MLL posted a net loss of INR128m vs. INR8m in 4QFY23 (our estimate of INR6m loss).

* EBITDA was impacted by one-time charges relating to IT integration and provisions. APAT was hit by higher tax outgo. Losses in the Express business narrowed as capacity utilization improved in 4Q.

* The 4Q performance was largely in line with our estimates. Going forward, Express business losses are expected to decline as volumes improve, which should result in improvement in overall EBITDA for MLL. Strong order intake in the 3PL business should also support growth in the near to medium term. We marginally increase our FY26 EBITDA/PAT estimates by 2%/6% on an improved earnings outlook. We estimate a CAGR of 23%/37% in revenue/EBITDA over FY24-26. We reiterate our Neutral rating with a revised TP of INR420 (premised on 23x FY26E EPS).

Higher utilization in Express business improves EBITDA; targets EBITDA breakeven by 1HFY25 end

* B2B Express business (Rivigo) reported revenue of INR972m (-7% YoY) and EBITDA loss of INR148m (vs. EBITDA loss of INR224m in 4QFY23). Express business has ramped up its capacity utilization to 80%. A pickup in volumes and the benefits of network redesigning boosted EBITDA.

* The Express industry is expected to face challenges in the near term due to slow activity at ground level.

* The management remains optimistic about achieving EBITDA breakeven by the end of 1HFY25, and PAT breakeven is anticipated by the end of FY25.

Highlights from the management commentary

* Supply Chain Management (SCM) recorded revenues of ~INR13.7b (up 14.6% YoY) and EBIT loss of INR114m. Enterprise Mobility Services (EMS) reported revenues of INR784m (up 3.9% YoY) and EBIT of ~INR21.5m.

* In 4QFY24, the 3PL Contract Logistics business grew 15% YoY. Some operations faced higher start-up and manpower costs. However, order intake was strong at ~INR1.6b, with a focus on speeding up execution. Onetime charges impacted the PAT of the 3PL business.

* In the B2B Express business, service levels are on track. The focus is on cost and network optimization, particularly load optimization in the south and east regions. Rivigo's focus on improving capacity utilization and sales efforts in 4Q led to margin improvement QoQ, with tonnage growth at 3.5% in 4Q.

Valuation and view

* With improvement in capacity utilization in the B2B Express business and strong order intake in 3PL, the growth outlook seems promising in the long term.

* We marginally increase our FY 26 EBITDA/PAT estimates 2%/6% on an improved earnings outlook. We estimate a CAGR of 23%/37% in revenue/EBITDA over FY24-26. We reiterate our Neutral rating with a revised TP of INR420 (premised on 23x FY26E EPS).

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