Logistics' company stock jumps 6% after Credit Suisse initiates coverage with 'outperform'

Global brokerage firm Credit Suisse has initiated coverage on the recently listed Delhivery with an outperform rating. The brokerage house initiated the coverage after the logistics company reported 106% growth in revenue to Rs 2,072 crore in the quarter ended March 2022, while net loss came almost flat at Rs 119.8 crore.

Initiating the coverage with an outperform rating, Credit Suisse said the structure of the industry is in favour of the Gurugram-headquartered company.  

"Ecommerce structural growth volume can grow by 30% and profit of the company can also see a good jump," said the report.  

On Wednesday's closing price of Rs 536 per share, the global brokerage firm gave a target of Rs 675 per share, which translates into an upside of nearly 26% on June 1 closing basis.  

Meanwhile, shares of Delhivery jumped almost six per cent (5.8%) to Rs 567.65 per share in Thursday's intraday trade on the BSE. At 10.45 am, shares of Delhivery were trading with a gain of Rs 19 to Rs555 apiece on the BSE. 

Parth Nyati, Founder, Tradingo, was of the view that despite the cash profits, the cash flows from operations have seen a significant decline in the recently concluded quarter.  

The frequent use of adjusted EBITDA and adjusted cash profits makes it difficult to comment on the actual profitability, he said. "We recommend investors wait for a few quarters to analyze how the business evolves in terms of revenue growth and profitability," the expert added.  

Earlier, Delhivery consolidated revenue increased by 63% from Rs 4,450 crore in FY21 to Rs 7,241 crore in FY22. The logistics company reported consolidated losses of Rs 119.8 crore for the current fiscal’s fourth quarter.  

The Company also delivered full-year operating profitability with an adjusted EBITDA of Rs. 72 Crore and Adjusted Cash Profit after Tax (APAT) of Rs 212 Crore in FY22, which is in line with the management’s strategy of turning profitable after scaling up and due to the operating leverage effect.