The Delhivery share price has risen more than 15% relative to the IPO so far since the IPO last week. Although the development of Delhivery stocks has been decent in the midst of a volatile stock market, analysts disagree on what the future holds for the stock. By initiating the coverage of Delhivery, Credit Suisse has set an ‘Outperform’ rating, while IIFL Securities has taken a different approach and initiated by ‘Sell’. The logistics service provider raised Rs 5,200 crore from the listing market earlier last month and received a lukewarm response from investors.
Credit Suisse: Outperform
Target price: SEK 675
Credit Suisse began coverage of Delhivery, saying there is a deep moat with scale, growth and profitability. The brokerage firm finds the industry structure favorable with structural growth in e-commerce volumes and strong moat and leadership within existing scale, network and technology. To add to that, the recent breakeven, with incremental growth helping profitability, has also been noted as positive.
The brokerage firm said they prefer Delhivery over internet peers as the firm has no customer acquisition costs, diversified growth in e-commerce as well as broader logistics and cheaper valuation for the same growth game. On the other hand, pricing, competition, withdrawal of private financing affecting sector growth, more investors, co-founders and volatility from lack of profits are key concerns around Delhivery.
The base case target price is set at Rs 675 per. share, but the blue sky scenario sees the share at Rs 800 per share. shares. In the bear case scenario, the target price has been set at Rs 300 per share. The base case target suggests 27% upside.
IIFL: Sell
Target price: Rs 442 per share
The domestic brokerage firm said that valuations seem to be embedded in the hassle-free strategy execution of rapid revenue upscaling, which limits costs, reduces dividends and yet becomes profitable in a sustainable way, hence the sales valuation. “We like the company’s focus on automation, scale and growth, but believe it’s going a tightrope given the performance challenges,” they added.
IIFL likes Delhivery’s upscaling, as the company has set up a pan-India B2C express logistics network in just 11 years. However, the IIFl has highlighted concerns. “The players in the niche logistics sector have similar asset light models, but compete on differentiated services in relation to the price alone and therefore register a 10-15% Ebitda margin. Since ~ 85% of the total costs are variable, it remains to be seen how Delhivery intends to improve its operating efficiency, achieve leverage, pass on the share of such gains to consumers and yet log a meaningful Ebitda margin in the absence of any significant price increase, ”they said.
Delhivery is believed to offer unfavorable risk reward, which is why the IIFL said they would await a better entry point. The target price indicates a 17% decline.
