Delhivery hits new high; soars 15% as Credit Suisse gives outperform rating

While announcing its Q4FY22 results, Delhivery said that majority of the investments made by the company in FY22 were towards capacity and capability building in the form of capex.

Shares of Delhivery surged 15 per cent to Rs 617 on the BSE in Thursday’s trade after global brokerage Credit Suisse initiated covergage on the stock with an 'outperform' rating and a target price of Rs 675. 

With this, the stock has gained 18.6 per cent in the last three days. The stock of the logistics services provider was trading at its highest level since listing on May 24, 2022.

At current levels, Delhivery is 27 per cent higher over its issue price of Rs 487 per share. The stock had hit a low of Rs 474 on its debut day.

Credit Suisse's rating on the stock comes on the back of a favourable industry structure, the company's structural growth in e-commerce volumes, the recent breakeven, with incremental growth aiding profitability synergistically and its strong moat in terms of scale, the note says.

"The sector is ripe for profitability gains post the recent breakeven for Delhivery. We prefer it to other internet peers on no customer acquisition cost, diversified growth and cheaper valuation for same growth play," it said. 

The brokerage estimates the company to report a 29 per cent plus revenue CAGR over FY22-25. 
 

While announcing its March 2022 quarter (Q4FY22) results, Delhivery said that the majority of the investments made by the company in FY22 were towards capacity and capability building in the form of capex (around 7 per cent of revenues in FY22) and inorganic growth, in addition to investments in working capital requirements.

These investments are expected to drive scale and enhance efficiency - reducing the cost of delivery and decreasing the time for delivery, the company had said.

Delivery’s express parcel volumes grew 101 per cent in FY22, far outstripping the industry volume growth of around 40 per cent, it added.

The logistics major had raised Rs 5,235 crore through its initial public offer (IPO) to utilize Rs 2,000 crore of the proceeds in funding growth initiatives, Rs 1,000 crore towards inorganic growth through acquisitions or strategic alliances and the remaining Rs 1,000 crore for general corporate purposes.

The company, which is the largest integrated logistics player by revenue, is eyeing steady growth in the Indian logistics sector, as well as market-share gains in the organised space.

Meanwhile, for Q4FY22, Delhivery posted a Rs 119.68 crore loss, slightly higher than the loss of Rs 118 crore the company reported in the same quarter of the last fiscal. On the upside, its revenues for the recent quarter doubled from the previous year to Rs 2,072 crore, as against Rs 1,003 crore in Q4FY21.

For the full financial year ended 2022, the logistics tech company’s net loss swelled to Rs 1,011 crore, compared to Rs 415.7 crore in the previous year. Its revenue, meanwhile, rose 89 per cent to Rs 6,882 crore for the year. CLICK HERE FOR FULL REPORT

“Despite the cash profits, the cash flows from operations have seen a significant decline. Further, the frequent use of adjusted EBITDA and adjusted cash profits makes it difficult to comment on the actual profitability. So, we recommend investors wait for a few quarters to analyze how the business evolves in terms of revenue growth and profitability," said Parth Nyati, founder, Tradingo.