Mahindra Logistics Q2 Review- Slower-Than-Expected Recovery In Express Business; 'Reduce': ICICI Securities

ICICI Securities Report

Mahindra Logistics Ltd.’s Q2 FY25 Ebitda performance undershot our/consensus estimates by 6.2%/23.6%. Key points:

1. Network services, which is ~18% of overall business, grew 46.1% YoY while third party logistics grew by 6.8%.

2. Gross margins improved for network services; however, it has declined to 10.4% in 3PL (11% in Q1 FY25) due to unabsorbed white space (~1.1 million square feet) and addition of contractual manpower for peak season.

3. Mahindra Logistics shall infuse Rs 500 million to support the cash burn at Rivigo; it needs ~35–40% volumes growth to achieve Ebitda break even, and target to become Ebitda positive by Q4 FY25, which seems daunting.

Given the H1 FY25 performance, we reduce our FY25E/FY26E EPS by 61.5%/6.8% and maintain Reduce with a revised target price of Rs 420 (earlier Rs 450).

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