Logistics major Delhivery likely to gain from higher volumes, margins

While the core segments did well, the performance in the supply chain services and cross border businesses underperformed due to the exits from unprofitable contracts and weak seasonal demand

The stock of logistics major Delhivery was one of the major gainers in the BSE 500 index, gaining over 7 per cent after a strong show in the first quarter of 2025-26 (Q1FY26) and expectations of improved growth and margins going ahead. Given the Q1 show and prospects going ahead, most brokerages have revised their estimates upwards. The stock has been a major outperformer, beating peers and major indices with returns of 49 per cent over the past three months. At the current price, the stock is available at price to earnings (P/E) valuation of 41 times its FY27 projected earnings.

 

The near-term trigger for the stock is the strong operational performance in Q1. Led by the core transportation segments of part truck load (PTL) and express parcel, revenues were up 5.6 per cent year-on-year (Y-o-Y). While volumes for PTL were up 15 per cent, express parcel segment saw a growth of 10 per cent over the year-ago quarter. On a sequential basis, while PTL volumes were flattish, express parcel volumes were up 18 per cent.

 

Commenting on the sequential increase in express parcel volumes, Kotak Research points out that the uptick in quarter-on-quarter (Q-o-Q) volumes happened on Delhivery’s pricing terms and on marginal changes in infrastructure investments as a 1 per cent increase in delivery centres yielded volume gains of 14 per cent. 

 

While the core segments did well, the performance in the supply chain services and cross-border businesses underperformed due to exits from unprofitable contracts and weak seasonal demand. The company, however, remains confident of scaling up the supply chain business, given the pruning of portfolio, improving capabilities, and reducing low-margin contracts.

 

The operating profit margin performance of the core segments was also strong. Express segment margins came in at 16.3 per cent due to network efficiency and operational discipline while PTL’s profitability improved sharply to 10.7 per cent as compared to the year-ago margin of 3.2 per cent. The gains for this segment were on account of value-added services, operating leverage, yield gains, and better capacity utilisation.

 

Given the strong operating performance of the core segments, the company expects margins to be in the 16-18 per cent range over the next two years. It hopes to achieve this on the back of yield improvement due to improved volume mix and repricing of key contracts, improving fleet utilisation, investments in automation, and operating leverage.

 

Motilal Oswal Research expects new services such as Delhivery Direct and Rapid to scale up while the Ecom Express acquisition could boost network synergies and lower capex intensity. With improvement in operating profit margins and an improved outlook, the brokerage has raised its operating profit estimates over FY26-FY28. Alok Deora and Saurabh Dugar of the brokerage expect Delhivery to report a net profit growth of 53 per cent over the FY25-FY28 period, and have a target price of ₹500.

 

Some brokerages believe that Delhivery will continue to gain market share. Anshul Agrawal and Kevin Shah of Emkay Research say, “While risks of further insourcing by Meesho persist, industry consolidation should result in prudent pricing discipline among Business-to-Consumer (B2C) operators.” Further a flight toward quality players would allow players such as Delhivery to bolster market share gains. Amid challenges in the B2C industry persisting in the short term, Delhivery’s ability to capture adjacent opportunities in logistics sets it apart from competition, they add. The brokerage has a price target of ₹350.