Q3FY24 Review: Delhivery: Confluence of all positives

5 Feb 2024 , 10:55 AM

Delhivery reported first ever profits in Q3FY24, on the back of improved realizations and lower costs, both attributable to peak season impact and higher share of heavy shipments. Going ahead, management has guided for improvement in margins on the back of costs rather than price; for this, Delhivery needs to walk a tight rope, invest in infrastructure, induce efficiency, and retain such gains when all logistics players are focusing on offering differentiated services and charging a premium for the same. 

Delhivery’s Q3FY24 performance substantiates IIFL’s view that it will earn profits provided there is marked improvement in realizations and reduction in the cost-to-income ratio; management comments indicate that expansion in yields may not sustain as the mix normalizes going ahead and no price hikes on cards. Through FY24-26, analysts at IIFL Capital Services assume ~500 basis points improvement in cost-to-income ratio for which the EBIDTA is seen registering a “V” shaped recovery. IIFL forecasts are accommodative and to that extent, valuations do not offer a margin of safety.