Neutral Mahindra Logistics Ltd For Target Rs.400 by Motilal Oswal Financial Services Ltd
Strong revenue growth with margin expansion; Express business turns EBITDA positive
* Mahindra Logistics’ (MLL) revenue grew ~24% YoY to ~INR21b in 2QFY27 (10% above our estimate).
* EBITDA margin was in line with our estimate and came in at 5.9% in 2QFY27 (up 90bp/10bp YoY/QoQ).
* EBITDA grew ~46% YoY to INR1.2b (10% above estimate).
* APAT stood at INR262m in 2QFY27 v/s adjusted net loss of INR104m in 2QFY26 (12% above our estimate).
* Supply chain management recorded revenue of INR19.7b (+24% YoY) and EBIT of ~INR358m. Enterprise Mobility Services (EMS) reported revenue of INR1.24b (+32% YoY) and EBIT of INR45.3m.
* MLL reported strong revenue growth and EBITDA margin in 2QFY27, driven by broad-based growth across the Contract Logistics, Express, Last Mile Delivery, Freight Forwarding, and Mobility segments. We increase our EPS estimates for FY27 and FY28 by 6% and 2%, respectively, and forecast a revenue and EBITDA CAGR of 19% and 28%, respectively, over FY26-28. We reiterate our Neutral rating with a TP of INR400 (premised on 21x FY28E EPS).
Healthy execution and margins drive earnings
* MLL reported a 24% YoY growth in consolidated revenue in 2QFY27, driven by a 28% YoY increase in the Contract Logistics segment, ~69% YoY growth in the Express segment, and a 33% YoY rise in the Mobility business.
* The company delivered healthy gross margins across business segments, with strong improvements in the Last Mile, Cross-Border, and B2B Express segments. The Express business reported its first-ever EBITDA positive of INR23m.
Highlights from the management commentary
* Management remains committed to improving Contract Logistics’ gross margins by approximately 100bp from the exit level of FY26. However, the improvement will be gradual, given persistent manpower cost pressures and the thin-margin nature of the business.
* The Express business achieved its first-ever EBITDA-positive quarter, with management targeting PAT positivity going forward.
* White space reduction in warehousing has been completed in 2QFY27, with 95% of white space reduced from the initial 1.6m sq. ft.
* The company aims to prioritize profitable growth over volume growth.
* In the mobility business, focus remains on acquiring new B2B customers and scaling the airport taxi business at the Noida International Airport.
Valuation and view
* MLL reported strong revenue growth and EBITDA margin in 2QFY27, driven by broad-based growth across the Contract Logistics, Express Segment, Last Mile Delivery, Freight Forwarding, and Mobility. The company remains focused on boosting execution, enhancing yields, optimizing existing capacity, and improving the Express business.
* We forecast a revenue and EBITDA CAGR of 19% and 28%, respectively, over FY26-28, and reiterate our Neutral rating with a TP of INR400 (premised on 21x FY28E EPS).
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