Delhivery has nothing to do with Zomato or PayTM – Credit Suisse expects stock to outperform

  • Logistics start-up Delhivery made a lukewarm debut on Indian stock exchanges on May 24 due to weak market sentiment and the company’s poor financial condition.
  • The company struggled to get demand for its IPO as investors stayed away from the IPO considering Delhivery to be a loss-making company.
  • Contrary to most opinions, Credit Suisse issued an “outperform” rating and suggested a 26% increase in the stock price.

Gurugram-based Delhivery has often been lumped together with other internet-based businesses like Zomato, PayTm and Nykaa – but one brokerage doesn’t think so.

Although the logistics company is betting on delivering goods for major e-commerce players, it’s not coping with what its customers have to do – spend money to acquire customers, according to Credit Suisse.

“We prefer Delhivery over other internet peers for no cost of customer acquisition, diversified growth – broader e-commerce and logistics, and cheaper valuation for the same growth game,” a report said. of the brokerage firm.

Credit Suisse initiated a hedge on the company which listed at a fixed premium of 1% on May 24, with an “outperform” rating. He expects the share price to climb 26% to ₹675 in a year. He believes Delhivery has a ‘deep gap’ with scale, growth and profitability.

Its rating is based on “strong moat and leadership in existing scale, network and technology, recent breakeven point, incremental growth synergistically driving profitability, diversified e-commerce growth, logistics broader and potential merit as an Internet game over others”.

Details Revenue Loss
EX22 ₹6,882,000,000 ₹1,011,000,000
FY21 ₹3,838,000,000 -₹415,000,000
FY20 ₹2,988,000 ₹ -268,000,000
FY19 ₹1,694 crore ₹ -1,783,000,000

Source: Delhivery DRHP and company filing

Delhivery doubles its parcel volume
The company also doubled its parcel volumes in FY22, gaining a strong market share of around 24-25% in the third quarter, driven by e-commerce activity. Credit Suisse expects more than 30% structural growth in e-commerce volumes.

While Delhivery’s IPO was subscribed 1.63 times, most of its subscriptions came from the qualified institutional buyers category.

The market seems to have lost its appetite for loss-making companies after a bad experience with Paytm, Zomato and others. The company doubled its losses in FY22 to ₹1,000 crore.

There were also concerns about its lofty valuations which earned it an ‘avoid’ rating.

“Despite an improvement in turnover, the company continues to make losses. As we are witnessing negative market sentiment towards similar class stocks (Zomato, Paytm), we suggest investors avoid this issue,” said a pre-IPO report from BP Equities.

Delhivery provides a comprehensive range of logistics services including Express Parcel Delivery, Heavy Cargo Delivery, PTL Freight, TL Freight, Warehousing, Supply Chain Solutions and Cross Border Services among others. Yet its heavy reliance on e-commerce is also concerning.

“A significant part of the company’s business is attributable to certain large customers. Their future actions could have a negative impact on the business of the company. If the company fails to expand the size of its business with existing customers, its business, revenue, profitability and growth could be adversely affected,” HEM Securities said at the time of its IPO.

Here are the brokerage recommendations at the time of the IPO a few weeks ago:

Brokerages Ratings
angel one Neutral
BP-Shares Avoid
ICICI titles Note noted
Hem titles Short term investors Avoid equities, long term may subscribe
Brokerage of choice Subscribe with caution

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