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Morgan Stanley believes that Delhivery’s Premium Valuations are Justified

Morgan Stanley believes that Delhivery’s Premium Valuations are Justified

delhivery-bcclPhoto : BCCLKEY HIGHLIGHTS

  • Initiates coverage on Delhivery, ‘Equal-weight’ Rating, Target Price at Rs 540/share
  • Stronger balance sheet position than most peers in the market
  • Valuation is at a premium but justified given superior growth profile

New Delhi: A newly listed logistics player, Delhivery, is in focus. It is one of the largest and fastest-growing logistics companies in India. The stock has dropped by about 7% since its close on listing day. Nevertheless, the stock has recovered about 6% from the close on June 20. Morgan Stanley has initiated coverage on the stock with an ‘Equal-weight’ Rating and a target price of Rs 540/share. This target price implies an upside potential of about 10%. Morgan Stanley believes that Delhivery is a scaled, sound and strong company. It has achieved size as well as sound unit economics in express business. Delhivery also has strong competitive advantages. A look at the financials indicates a stronger balance sheet position in comparison to most peers in the market. This in turn reduces the risk of any irrational competitive behaviour in Morgan Stanley’s view. Related NewsCredit Suisse Initiates Coverage On DelhiveryCredit Suisse Initiates Coverage On DelhiverySame day delivery service launched by Delhivery in 15 cities Check detailsSame day delivery service launched by Delhivery in 15 cities. Check detailsThey expect to see growth in revenue at a CAGR of 29% from FY22 to FY26. Additionally, Adjusted EBITDA margins turned positive in FY22. Morgan Stanley expects Delhivery to post steady-state margins of ~9% by FY26. In fact, the logistics player is expected to be Free Cash Flow and Net Profit positive in the second half of FY24 or in FY25. Some of the factors that could trigger a potential upside in the Delhivery are continued market share gains in the express parcel business as well as better-than-expected performance in the PTL business. These two combined could lead to a surprise in revenue growth. Faster-than-expected integration-led synergies from Spoton could surprise on the margin front. The EV/Adj EBITDA multiple is at 54x FY24 estimates. When this valuation is viewed in comparison to its Chinese peers’ 7x-11x, US peers’ 6x-11x and Indian peers’ 10-22x, the valuation appears to be at a premium. However, Morgan Stanley believes that the valuation is justified given its superior growth profile. And on the back of this brokerage report, Delhivery is in focus today. .

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MARKET LIVE: Sensex, Nifty choppy; defensives drag, Zomato soars 14%

MARKET LIVE: Sensex, Nifty choppy; defensives drag, Zomato soars 14%

The key benchmark indices opened Tuesday’s session on a quiet note tracking losses in US equity futures and subdued Asian

In ealry deals, the BSE Sensex was down 100 points to 54,210, while the NSE Nifty was at 16,180, lower by 35 points.New listingLogistics giant Delhivery saw a tepid debut, listing at 1.2 per cent premium on the BSE, at Rs 493 vs the issue price of Rs 487 a share.Venus Pipes and Tubes debuted at Rs 335, a premium of 2.76 per cent over the issue price of Rs 326, on the BSE. 

That apart, sectorally, Nifty metals that slumped over 8 per cent the previous day, was seen recovering partially. The index rose 1 per cent, PSBs also gained a per cent. The two were leading sectoral gains. Other gainers included Nifty energy, banks and auto pockets. While, FMCG and IT were in the red. try{window.fbAsyncInit=function(){FB.init({appId:’260417335472974′,autoLogAppEvents:true,xfbml:true,version:’v3.2′});};(function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(d.getElementById(id)){return;}js=d.createElement(s);js.id=id;js.src=”https://connect.facebook.net/en_US/sdk.js”;fjs.parentNode.insertBefore(js,fjs);}(document,’script’,’facebook-jssdk’));}catch(e){console.log(e);}!function(f,b,e,v,n,t,s){if(f.fbq)return;n=f.fbq=function(){n.callMethod?n.callMethod.apply(n,arguments):n.queue.push(arguments)};if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;n.queue=[];t=b.createElement(e);t.async=!0;t.src=v;s=b.getElementsByTagName(e)[0];s.parentNode.insertBefore(t,s)}(window,document,’script’,’https://connect.facebook.net/en_US/fbevents.js’);fbq(‘init’,’550264998751686′);fbq(‘track’,’PageView’); .