Delhivery's E-Com Integration Sparks Analyst Interest: 'ACCUMULATE' Rating Maintained with Strong Target!

Prabhudas Lilladher has revised its financial models for Delhivery Limited, incorporating the integration of E-com express starting from the first quarter of fiscal year 2026 (2QFY26). The brokerage noted that Delhivery's operational performance was stronger than anticipated, achieving an EBITDA margin of 6.2%, which exceeded their projection of 5.9%, even after accounting for Rs 900 million in integration costs related to the E-com express acquisition. This improvement was largely driven by a turnaround in the Supply Chain Services (SCS) division, which reported a healthy service EBITDA margin of 12.9%. However, the Business-to-Consumer (B2C) parcel division saw its service EBITDA margin increase by only 20 basis points year-on-year to 15.1%. The division experienced a 6.7% year-on-year decline in yields to Rs 65.5, as the average weight per parcel on E-com's network is lower, meaning the expected operating leverage benefits were not fully realized. The Part Truckload (PTL) division's service EBITDA margin also saw a sequential decrease to 8.5%, attributed to weaker absorption of fixed costs following delays in shipments after recent changes in GST rates.

Outlook Prabhudas Lilladher forecasts Delhivery to achieve a sales compound annual growth rate (CAGR) of 14% over the next three years. They expect EBITDA margins to be 5.1% in FY26E, 9.4% in FY27E, and 10.2% in FY28E. The brokerage has maintained its 'ACCUMULATE' rating on the stock with a target price of Rs 489, based on a multiple of 38 times September 2027E EBITDA, keeping the target multiple unchanged.

Impact This report provides an updated outlook and valuation for Delhivery from a key brokerage. The 'ACCUMULATE' rating and target price suggest potential upside for investors, provided the company executes its integration and growth strategies effectively. The analysis of divisional performance and future margin expectations offers investors crucial insights into the company's operational health and growth prospects. The market may react positively if investors find the growth projections and target price compelling. Rating: 7/10.

Difficult Terms: EBITDA margin: Earnings Before Interest, Taxes, Depreciation, and Amortization margin. It is a measure of a company's operating profitability. SCS division: Stands for Supply Chain Services, referring to services related to managing and optimizing supply chains. B2C parcel division: Business-to-Consumer parcel division, handling delivery services directly to individual customers. PTL division: Part Truckload division, likely referring to less-than-truckload (LTL) freight services where a single truck carries shipments from multiple customers. Yields: The revenue generated per unit of service, such as revenue per parcel or revenue per kilogram delivered. Operating leverage: The extent to which fixed costs contribute to changes in profitability. High operating leverage means small changes in sales can lead to large changes in profit. GST rates: Goods and Services Tax rates, a tax levied on the supply of goods and services in India.