DELHIVERY - Delhivery Limited Share Price

Delhivery's management provided an optimistic outlook during the Q4 FY25 earnings call, highlighting robust growth and profitability. Key points from management included:

1. For Q4 FY25, revenues were reported at Rs.2,192 crores, reflecting a 6% year-on-year increase, despite a sequential decline of 8% from the peak in Q3. The EBITDA stood at Rs.119 crores, with a margin of 5.4%, marking an expansion of 320 basis points year-on-year and 110 basis points sequentially.

2. The PAT for Q4 was Rs.73 crores, a significant improvement from a loss of Rs.69 crores in Q4 FY24. This represented a year-on-year swing of approximately Rs.140 crores and a tripling from the Rs.25 crores reported in Q3 FY25.

3. Delhivery delivered 177 million packages in its Express Parcel business for Q4 FY25, while the Part Truckload (PTL) business saw a 19.4% growth year-on-year, achieving 460,000 tons of freight.

4. Total revenue from services for FY25 reached Rs.8,932 crores, up nearly 10% YoY, with the company achieving its first profitable year, reporting a PAT of Rs.162 crores compared to a loss of Rs.249 crores in FY24.

5. Management emphasized expectations for ongoing growth in the PTL segment, citing a significant market potential due to the predominance of unorganized players. They noted that Delhivery aims to maintain or improve margins, targeting a long-term Capex intensity reduction to between 3.5% and 4%.

6. On the acquisition of Ecom Express, management stated a conservative approach was taken, estimating retention of about 30% of Ecom's volumes but expressed satisfaction with initial trends indicating customer movement towards Delhivery post-announcement.

7. Future margins were anticipated to improve as pricing pressures in the market recede, with incremental margins expected to rise with increasing volumes. Management also indicated that they expect to execute cost efficiencies through ongoing investments in technology and network capabilities.

Overall, Delhivery's management is focused on sustained profitability, growth strategy through acquisitions, and operational improvements, positioning themselves strongly in a consolidating logistics market.

Major Questions and Answers from the Earnings Call

1. Question: "...what is the growth runway you are expecting, given that we have reached certain economies of scale?"

Answer: I believe our PTL business continues to have a significant growth runway. The Indian logistics market is largely unorganized, with about 80% still operating outside of structured companies like ours. Our investments in capacity and automation have allowed us to outperform the industry while driving margins. We project that as we gain further accounts and build capacity responsibly, our growth trajectory will remain strong and profitable.

2. Question: "What would be the fleet utilization levels at the moment in Q4?"

Answer: While our utilization was approximately 65% prior to Q3, I can confirm it has surpassed 70% in Q4. Better engineering of truck routes and improved loading software have contributed to this. However, I refrain from giving a precise estimate because our capacity definitions evolve as we refine our operational efficiencies.

3. Question: "...is the margin expansion expected to kick in when Ecom Express gets integrated?"

Answer: Yes, we anticipate margin expansion post-integration with Ecom Express. Delhivery has historically enjoyed high incremental margins; even amidst pricing pressures, we'll still see operational efficiencies improve. As volumes come in post-integration, we do expect an increase in our overall margins, alongside potential price adjustments for deserving clients to drive growth.

4. Question: "How do you think the 3PL industry structure evolves going forward?"

Answer: I see Delhivery as a dominant player in this space, especially after acquiring Ecom Express. There are too many players in the market currently; consolidation is inevitable for loss-making networks. We aim to capitalize on this by expanding our market positioning, reducing operational costs, and improving service delivery.

5. Question: "What was the reason for assuming only a 30% retention on Ecom Express customers?"

Answer: This conservative estimate was primarily for valuation purposes. We wanted to manage expectations realistically, knowing that surprises can come from optimistic assumptions. The actual retention may exceed this expectation as we've seen a robust shift of volumes into Delhivery even before the formal integration happens.

6. Question: "Can you talk about your Capex outlook considering the Ecom Express acquisition?"

Answer: We project our Capex will stabilize at around 3.5% to 4% of revenue in the longer term. With the acquisition, our automation will require minimal new investment. We anticipate improvements in Capex efficiency starting from FY27, given the automation assets we'll gain from Ecom, allowing us to keep costs in check.

7. Question: "What is the future outlook for the PTL business considering you are sitting on high base?"

Answer: We remain optimistic about our position in the PTL segment. The trend of unorganized logistics shifting towards organized players continues. Delhivery has unique cost advantages and service efficiencies, and I foresee our revenue and profitability growth in PTL continuing without major disruptions in the foreseeable future.