SELL (Target Rs226, Downside 24.1%)
Mahindra logistics (MLL) reported topline of Rs4.1 bn (down 54.3% yoy). The performance was impacted by nationwide lockdown due to the Covid-19 pandemic as significant reduction in industrial activity, and weak business sentiment reduced logistics requirement. Despite higher contribution from the better margin warehousing segment, gross margin remained stagnant at ~9.7% owing to subdued utilizations. Also, lower revenue and higher employee expense translated into loss at operating level (Rs.22mn). While Supply Chain Management (SCM) segment de-grew ~51% yoy, a larger hit was seen in the Enterprise Mobility (EM) division wherein revenue declined ~82% yoy. The performance in the EM segment was hit hard by lesser requirement of transportation with large part of clients' employees continuing to work from home.
We expect revenues to be remain under pressure in FY21 with continued weakness in the auto segment. Also, MLL's EM division is likely to remain impacted, with IT and Financial sector employees largely Working from Home (WFH). On the margin front, despite increasing contribution from warehousing, we expect operating margin to moderate to ~4.4% during FY22E with higher operating costs. We largely maintain our estimates and retain our SELL rating on the stock with a Target Price of Rs.226 (28x FY22E P/E). Weak business sentiments and delayed recoveries to impact MLL's performance in the near to medium term.
Shares of Mahindra Logistics Ltd was last trading in BSE at Rs.300.7 as compared to the previous close of Rs. 297.75. The total number of shares traded during the day was 2116 in over 187 trades.
The stock hit an intraday high of Rs. 309.8 and intraday low of 295. The net turnover during the day was Rs. 638949.