Brokerage firm Motilal Oswal has maintained a 'Buy' rating on Delhivery with a target price of Rs 570, citing strong growth potential. While the logistics company reported a 28% rise in revenue for the first quarter of FY27, net profit fell by 65% due to higher operational costs and expenses from the Ecom Express acquisition. Investors are monitoring how the company manages these cost pressures to stabilize its profit margins in the coming quarters.
Motilal Oswal has retained a 'Buy' rating on Delhivery, setting a target price of Rs 570 based on its long-term growth outlook. This positive view comes despite a challenging start to the 2027 fiscal year, where the company’s profit figures took a significant hit. Investors are currently weighing the company's strong delivery volume growth against the short-term pressure on its profitability.
In the first quarter of FY27, Delhivery reported a 28% year-over-year increase in revenue, reaching Rs 2,931 crore. A key driver for this top-line growth was a 55% jump in express parcel shipments, which totaled 322 million packages. However, this growth in business did not translate into higher earnings for shareholders this quarter. The company’s consolidated net profit fell by approximately 65% to Rs 32 crore compared to the same period last year.
The decline in profit was largely driven by a squeeze on profit margins, which settled between 4.9% and 5.3%. The brokerage firm and the company pointed to several factors affecting these margins. Increased labor costs—stemming from wage revisions and the impact of elections on worker availability—weighed on the bottom line. Additionally, the company faced higher fuel costs due to a lag in its fuel price pass-through mechanism, and it incurred extra expenses related to the integration of the Ecom Express business.
To address these challenges, Delhivery has taken steps to stabilize its operational costs. The company has renegotiated fuel contracts to cover 97-98% of its shipping volumes, which is intended to reduce the impact of fuel price volatility on its future finances. Management remains optimistic about a structural recovery in margins as these cost-management measures take effect and as the integration costs of the new acquisition begin to fade.
Investors looking at the stock should also consider some of the risks noted by analysts. Beyond the near-term margin volatility and the pressure from rising labor and fuel inflation, the company is experiencing a change in leadership with the resignation of its Chief Operating Officer (COO), Ajith Pai. Whether the company can effectively manage its operational expenses while maintaining its strong pace of volume growth remains the key monitorable for the coming quarters. The market will be watching closely to see if the promised margin recovery materializes in the next financial updates.