The brokerage cited the recent shar rally in the stock price, which factors in the benefits of a turnaround in the express segment and lower interest expenses post the completion of its ₹750 crore rights issue.
However, Avendus Spark expects Mahindra Logistics’ profitability to remain depressed due to delay in scaling-up the express operations and moderation in freight forwarding operations.
It does see Mahindra Logistics to benefit from a steady third-party-led growth led by a ramp-up of new contracts, and growth in e-commerce demand.Mahindra Logistics has intentions to triple its topline by financial year 2030. Five key factors that can lead to this growth are:
- Growth in fulfillment logistics and warehouse services
- Increase in adoption of multimodal transportation systems
- Rise in omnichannel distribution models, especially in e-commerce an consumer sectors
- Higher level of service integration & demand for integrated solutions
- and greater adoption of technology in creating the customer value proposition.
Avendus Spark said that their target multiple of 25 times financial year 2027 Earnings Per Share (EPS) factors in constrained returns and limited free cash flow generation due to subdued profitability.Out of the 11 analysts that have coverage on Mahindra Logistics, three of them have a “buy” rating on the stock, while four analysts each have a “hold” and “sell” rating respectively.
Mahindra Logistics shares are also trading adjusted for its rights issues. The company intends to raise ₹750 crore through the rights issue. The existing shareholders of Mahindra Logistics are entitled to receive three shares for every eight shares they own as part of the rights issue.
Adjusted for the rights issue, shares of Mahindra Logistics are trading 1.7% lower on Wednesday at ₹365.45. The stock had risen over 20% in the last one month, prior to today’s session.
