Delhivery shares in a free fall, tanks 31% in 2 days: Buy, Sell or Hold - brokerages recommend

Shares of Delhivery continued their slide for second consecutive day on Friday, October 21. The stock has tanked 31 per cent in the two sessions. Today, the counter finished at Rs 381.60 on NSE, crashing 19 per cent. The freefall in logistics firm's shares came after the company provided a summary of the company's operating performance and key business and industry trends for the quarter ended September 30.

The stock has now declined nearly 45 per cent from its all-time high of Rs 708 on NSE. In fact, Delhivery share price has slipped below the issue price of Rs 487. The Gurugram-based company had made muted stock market debut in May this year.

Delhivery through an exchange filing said that market sentiment in Q2 continued to remain broadly unchanged from Q1. Consumer discretionary spending remained muted due to continuing high levels of inflation, with average user spends and total active shoppers remaining flat or lower during the ongoing festive season, as per the industry reports.

Industrial output (IIP) also remained weak in the first 2 months of the quarter. In spite of the challenging market conditions, our market position remains strong owing to our structural cost advantages, network size and investments in capacity.

Express Parcel volumes remained stable in Q2 and picked up towards the end of the quarter, driven by festive season sales, especially in the Heavy Goods category. Overall service line volumes for the business grew in the high teens in Q2FY23 over a large base of the same quarter last year (Q2FY22). While the festive season sale surge in shipment volumes will spill over to Q3FY22 as well, we anticipate moderate growth in shipment volumes through the rest of the financial year, the company said.

Brokerages on Delhivery Stock

Goldman Sachs has downgraded rating with a reduced price target of Rs 480 from Rs 520.

CITI has given a buy recommendation with a reduced target of Rs 688 from Rs 740 apiece.

The company said that its Part Truckload (PTL) business faced operational challenges in Q1FY23 due to integration of Delhivery and SpotOn networks. However, the business is on a path to recovery and we recorded high teens growth in freight tonnage handled on a QoQ basis (Q2FY23 v/s Q1FY23). A majority of Delhivery and SpotOn’s pre-integration customers have restarted shipping through the integrated network.

The company said that it onboarded 200+ new customers in Q2FY23, driven by improving service metrics and expect the volumes to continue to show a gradual scale up through FY23.

Volumes in our Supply Chain Services (SCS) and Truckload (TL) businesses declined in Q2FY23 v/s Q1FY23 owing to the expected effects of seasonality in our customers’ businesses. However, both businesses have shown substantial double-digit growth compared to Q2FY22.

The cross-border business also showed steady growth on a YoY basis despite a global slowdown and a decline in yields for both air and ocean freight.

"Going forward we remain watchful of the market sentiments. We have made sufficient capacity investments in FY22 and early FY23 to sustain our current rate of growth and expect new mega-gateway and sorter decisions only by early FY24. As inflationary pressures and service disruptions due to monsoon ease across the country we expect improvement in volumes, revenue and service margins going forward," the company said.