Neutral Mahindra Logistics Ltd for the Target Rs. 330 by Motilal Oswal Financial Services Ltd
Muted performance
* Mahindra Logistics’ (MLL) revenue grew ~11% YoY to INR16.8b in 2QFY26, in line with our estimate.
* EBITDA margin came in at 5% (up 60bp YoY and 30bp QoQ) vs. our estimate of 5.1%. EBITDA grew ~28% YoY to INR851m (in line with our estimate).
* Adjusted net loss stood at INR104m in 2QFY26 vs adjusted net loss of INR107m in 2QFY25 (our estimate of INR75m profit).
* Supply chain management recorded revenue of INR15.9b (+11% YoY) and EBIT loss of ~INR69.3m. Enterprise Mobility Services (EMS) reported revenue of INR938m (+17.7% YoY) and EBIT of INR15.6m.
* The Board has approved an investment of INR500m in its B2B express logistics arm, MLL Express Services Private Limited (MESPL), through subscription to a new rights issue of shares. The funds will be utilized to meet working capital requirements, support ongoing operations, and for general corporate purposes. This investment will help strengthen the subsidiary’s balance sheet and support its growth plans, while enabling MLL to retain 100% ownership.
* MLL reported decent revenue growth in 2QFY26, driven by broad-based growth across Contract Logistics, Express, and Warehousing. However, overall earnings remain below par, weighed down by continued losses in the Express business. We have reduced our FY26/FY27 APAT estimates by 36%/1% as profitability remains a concern. We estimate a CAGR of 18%/26% in revenue/EBITDA over FY25-28 and reiterate a Neutral rating with a TP of INR330 (premised on 15x FY28E EPS).
Express segment continues to incur losses; Warehousing and Contract Logistics steady
* MLL reported an 11% YoY growth in consolidated revenue in 2QFY26, driven by a 13% YoY increase in the Contract Logistics segment, 9% YoY growth in the Express segment, and a 13% YoY rise in the Mobility business.
* The Express business reported positive gross margin for the first time since the acquisition, with volumes rising 7.2% YoY. However, it continued to report losses at the EBITDA level.
* Warehousing operations continued to scale up, with new facilities totaling 0.3m sq feet going live in Nashik.
* MLL remains focused on optimizing its existing capacity before pursuing further expansion. The company reduced white space in warehousing by 20% in 2QFY26 and targets a 95% reduction by Sept’26, thereby driving optimization.
* MLL has completed a rights issue of INR7.5b as part of its deleveraging strategy. Of this, the company has successfully reduced debt from INR6.1b to INR730m, while the remaining INR1.87b will be retained for general corporate purposes. The debt repayment is expected to result in annual finance cost savings of INR400-450m
Highlights from the management commentary
* The Board has approved an investment of INR500m in the Express business segment.
* The B2B business recorded modest volume growth and reported a positive gross margin for the first time. Going forward, MLL aims to improve yields, even if it means letting go of certain volumes.
* MLL has recorded a one-time bad debt provision of INR48m following the bankruptcy of one of its customers.
* The company continues to expand its warehousing footprint, with new sites totaling 0.3m sq ft going live in Nashik during the quarter.
* The auto business contributed about 58% of the revenue, while the Mahindra Group contributed ~54%.
* MLL has completed the rights issue of INR7.5b as part of its deleveraging strategy. Of this, the company has successfully reduced debt from INR6.1b to INR730m, while the remaining INR1.87b will be retained for general corporate purposes.
Valuation and view
* MLL reported decent revenue growth in 2QFY26, driven by broad-based growth across the Contract Logistics, Express, and Warehousing segments. Going forward, the company remains focused on strengthening execution, enhancing yields, optimizing existing capacity, and improving the Express business, for which the Board has approved an investment of INR500m to support its growth trajectory.
* We have reduced our FY26/FY27 APAT estimates by 36%/1%, as profitability remains a concern. We estimate a CAGR of 18%/26% in revenue/EBITDA over FY25-28 and reiterate a Neutral rating with a TP of INR330 (premised on 15x FY28E EPS).
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