Bernstein starts coverage on Delhivery with ‘market-perform’ rating, sees 11% upside

Foreign research and broking firm Bernstein has initiated coverage on Delhivery, with a market-perform rating as the firm remains positive on the logistics company’s long-term growth prospects. Bernstein has assigned a target price of Rs 360 for the stock, which translates into an upside potential of over 11 percent from Monday’s closing price.

Despite the brokerage firm’s belief that various challenges, primarily related to the execution and integration of its acquisition, have resulted in Delhivery’s worst-ever year for growth in FY23, it maintains a positive outlook on the long-term potential of logistics players in India, particularly those associated with rapidly expanding verticals.

“After three-quarters of weak performance, we expect a recovery in both growth and margins as the challenges that Delhivery faced in PTL (partial truckload) and e-commerce segments are slowly getting resolved. Medium-term, we expect mid-teen revenue growth with an adjusted EBITDA ( Earnings Before Interest, Taxes, Depreciation, and Amortization) breakeven in FY24,” Bernstein wrote in its report.

Shares of the logistics company also reacted positively to the news and at 11.40am, shares of Delhivery were trading at Rs 327.60 on the National Stock Exchange, up 1.36 percent from the previous close.

Highlighting the downside risks, the report pointed that the long queue of PE (private equity) exits will cap returns for the logistics company. This is because over 40 percent of the stock is still held by PE/VCs (Private Equities and Venture Capitals) who have sold over already sold 10 percent of stake after the company’s initial public offering. According to Bernstein, it is this continuous churn of big PE exits that will cap the upside for a while.

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