Logistics company Delhivery Ltd poured cold water on investors’ hopes with muted September quarter (Q2FY24) earnings. Income at ₹1,942 crore, up 8% year-on-year, falling short of consensus estimates. The critical Speed Parcel business was a dampener with volume growth of 12% at 181 million, dampening expectations. Important still, the adjusted Ebitda loss of ₹13 crore, though encroachment, another concern. Management attributed lower growth in the first half of the year to a number of factors such as the integration of Spoton Logistics, which expanded its presence across geographies. Ebitda is earnings before interest, taxes, depreciation and amortization.
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That said, it is a comforting fact that the second half of the year tends to be stronger for Delhivery. The Christmas season and year-end sale season in December attracts higher volumes not only from platforms like Amazon, and Flipkart, but also from brands with omni channel presence, management said in the Q2FY24 earnings call. Management continues to expect the e-commerce industry to grow 15-20% going forward with Delhivery seeing volume growth at the highest end. In October, Express Parcel volumes likely exceeded 70 million and daily Part Truck Load (PTL) volumes are starting to touch levels of 4,600-5,000 tonnes, management added. The PTL business, which caters to the B2B segment, saw volume growth of 22% in Q2FY24 to 348,000 tonnes. In addition, the company is also taking steps to revive margins and increase its market share. For example, its strategy to pass on efficiency gains in the B2C segment (where customers are price-sensitive) bodes well for future market share gains, said a Nov. 5 Emkay Global Financial Services report. In addition, yield improvements in the B2B segment, which focuses more on network speed and reliability, should help the path to profitability, he said. Also, with the bulk of the investment in network expansion for FY24 behind, operating leverage should improve in H2 to help turn around in Ebitda. Hence, Emkay expects adjusted Ebitda to break even in FY24.
For now, the speed of margin recovery and market share trajectory would be critical for the stock. But that alone may not be enough. Over the long term, if the pre-IPO enthusiasm is to return, then the continued profitability will have to be accompanied by 18-20% growth on express parcels for several years (the main reason why the investor is buying in during the IPO) . , according to Nuvama Research. Since listing in May 2022, the stock has declined 17.4% and settled at ₹409.
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