Buy This Logistics Stock At Target Price Of Rs 600: ICICI Securities

Mahindra Logistics is an end-to-end 3PL logistics solution provider, from performing milk run to in-factory logistics, warehousing to first mile and last mile logistics. Serves over 400 customers via its two business segment: supply chain management [(SCM), 96% of revenues] and enterprise mobility. Revenues from Mahindra comprise 52% of SCM revenues (FY21) while the rest is contributed by non-Mahindra.

What should you buy it?

Diversification and expansion into newer channels like Last Mile Logistics, Freight Forwarding, together with its core strength of first and mid mile logistics, helps MLL to provide an integrated package to customers. The above enables it to shift buying behaviour (more online shopping), leading to higher warehousing space requirement and 3PL relevance. Asset light business model, with projected 35%+ RoCE in FY24E.

Q4FY22 Results

The ICICI securities says, "the results were better than I-direct estimates on all fronts."

• Revenues grew 10% YoY to Rs 1073 crore, led by better-than-expected SCM segment performance.
• EBITDA grew 19% to Rs 55 crore with margins at 5.1% (vs. Expected 4.3%).
• However, PAT was flat at Rs 12 crore as strong operating performance was impacted by higher interest and depreciation.

Valuation

Positive product mix (non-auto grew 33% in FY22 and has comprised 43% of SCM revenues), provides MLL an opportunity to optimise its warehousing: transportation mix (24:76 for FY22) and capture higher wallet share of its customers (with higher customer stickiness).

The broker said, " We maintain our BUY stance, due to long-term growth drivers in MLL."

The broker added, "We value the stock at Rs 600 i.e. 34x P/E on FY24E EPS."

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.