Delhivery Ltd. share price target

In this note we highlight some of the key takeaways from Delhivery’s Analyst Day event organised at their Tauru warehouse (Gurugram,Haryana) on June 5, 2023. Delhivery team has taken some new initiatives (such as RTO scores) to improve data visibility for customers, which we believe could in turn help in gaining share in express parcel segment or open up newer avenues for monetization.

In Q4FY23, Delhivery reported positive EBITDA margin for the first time since listing. Though the quantum of EBITDA profitability is not significant from a valuation context, the steady improvement over the last 2-3 quarters is a positive development.

Delhivery’s Q3FY23 revenue was lower than our estimates due to delayed recovery in PTL volumes. Management clarified that this was due to network footprint optimisation and subdued volumes in the first few days of Q3FY23 caused by unseasonal rains in Tauru.

We believe Delhivery’s current valuations provide a great opportunity to BUY this high quality stock. The risk-reward skew at current market price is very attractive in our view (5.3:1).

Delhivery reported adjusted EBITDA loss of Rs2.17bn for Q1FY23, departing from the positive trend under the same parameter over the past two quarters.

Delhivery’s B2C-heavy business model has a potential profit pool of Rs 63bn in India in our view (by FY26E). Our base case assumes Delhivery to capture ~25% of the same. We see significant scope of operating leverage with global best practices in distribution, sorting as well as consolidation likely streamlining processes.

Outlier growth prospects with profit round the corner

Issue Snapshot: Issue Open: May 11 May 13, 2022 Price Band: Rs. 462 487 (A discount of Rs.25 for all eligible employee) *Issue Size: Rs 5235.0 cr (Fresh issue 4000 cr + offer for sale of 1235 cr) Reservation for: QIB atleast 75% eq sh Non Institutional upto 15% eq sh ((including 1/3rd for applications between Rs.2 lakhs to Rs.10 lakhs)) Retail upto 10% eq sh Employee Reservation: aggregating upto Rs. 20 Cr Face Value: Rs 1 Book value: Rs 93.19 (Dec 31, 2021) Bid size: - 30 equity shares and in multiples thereof 100% Book built Issue Delhivery Limited - IPO Note