ICICI Securities Reaffirms BUY on Delhivery, Sets Target Price at INR 600

ICICI Securities, in a recent research report, has maintained its 'BUY' recommendation for Delhivery, a leading logistics provider, with a price target set at INR 600. This target implies an Enterprise Value to forward EBITDA multiple of 40x, based on their three-stage Discounted Cash Flow (DCF) model.

The report details robust operational performance, with express parcel volumes growing by an impressive 33% year-over-year (YoY) and revenue increasing by 24% YoY. While the express parcel yield saw a 3% decline quarter-over-quarter (QoQ) due to a less favorable mix of shipments, Delhivery demonstrated pricing power with a 3% YoY increase in its Part Truckload (PTL) segment, while tonnage grew by 12% YoY.

However, service-level EBITDA margins fell short of estimates by approximately 100 basis points. This was attributed to proactive capacity expansion for the festive season and a week's delay in dispatches following changes in GST rates. Furthermore, transient costs related to the Ecom Express acquisition amounted to INR 900 million in the second quarter of FY26. Encouragingly, the management now expects the total integration cost to be around INR 2.1 billion, which is 30% lower than the initial forecast of INR 3 billion.

Impact: This report carries significant weight for investors. The sustained BUY rating and ambitious target price from ICICI Securities signal strong conviction in Delhivery's future prospects. The company's ability to grow volumes and manage pricing, coupled with better-than-expected acquisition integration cost control, points towards potential positive stock performance. Investors may interpret any price dip as an opportune moment to accumulate shares, given the positive outlook on demand and industry consolidation. Rating: 8/10

Difficult Terms:

* **YoY (Year-over-Year):** A method of comparing current period results to the same period in the previous year to show growth or decline over a 12-month span. * **QoQ (Quarter-over-Quarter):** A method of comparing current quarter results to the immediately preceding quarter to assess short-term performance trends. * **Yield:** In logistics, this refers to the average revenue generated per parcel or per unit of shipment. A decline in yield suggests lower revenue per unit handled. * **Inferior Mix:** A situation where the proportion of lower-revenue-generating services or customer segments increases within the company's overall business, impacting average yield. * **PTL (Partial Truckload):** A freight shipping service where a single truck carries shipments from multiple customers, none of whom need the entire truck's capacity. * **Pricing Power:** A company's ability to increase prices for its products or services without significantly losing customers or sales volume. * **EBITDA margin:** A profitability metric representing Earnings Before Interest, Taxes, Depreciation, and Amortization as a percentage of revenue. It reflects operational efficiency. * **Festive Capacity Build-up:** Increasing infrastructure and resources (like warehouses, vehicles, staff) in advance to handle anticipated higher demand during holiday or festival seasons. * **GST (Goods and Services Tax):** A value-added tax levied on the supply of goods and services in India. * **Transient Costs:** Temporary expenses incurred during a specific, short-term period, such as during the integration of an acquired company. * **DCF Model (Discounted Cash Flow Model):** A valuation method that estimates the value of an investment based on its projected future cash flows, discounted back to their present value. * **EV/EBITDA (Enterprise Value to EBITDA):** A valuation ratio used to assess a company's financial performance. It compares the company's total value (enterprise value) to its operational earnings (EBITDA).