delhivery: Credit Suisse initiates coverage on Delhivery

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Mumbai: Credit Suisse has initiated coverage on logistics and supply chain startup Delhivery with an outperform rating and a target price of ₹675 citing favourable industry structure, structural growth in e-commerce volumes and strong moat, among other factors.

The brokerage prefers Delhivery to other internet peers as there is no customer acquisition cost, there is diversified growth and it comes at a cheaper valuation for the same growth play.

“Delhivery has a strong moat in terms of scale, network complexity, and a versatile technology platform. The company doubled parcel volumes in FY22 (versus 40% market growth) gaining a strong market share of 24-25% in the third quarter of FY22 in all e-commerce parcel volumes and around 60-65% in ex-captive,” said Credit Suisse.

Shares of Delhivery ended up 6.3% at ₹570 on Thursday. The startup made a muted stock market debut on May 24, listing at a 1.23% premium to its IPO price of ₹487 but it ended its listing day with a gain of 10.3% over the IPO price.

“We estimate 29% plus revenue CAGR (compounded annual growth rate) over FY22-25 with profitability expansion to 5.5% adjusted Ebitda margin by FY25,” said Credit Suisse.

The brokerage said the industry structure is changing as the express parcel business is consolidating with three large payers.

Credit Suisse also pointed at the opportunity size as China’s e-commerce parcel volume is around 40 times that of India. “The sector is ripe for profitability post the recent breakeven for Delhivery.”

Last month, the company’s managing director Sandeep Barasia had said that Delhivery’s adjusted operating profit for the nine months of FY22 would almost break even.

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