Buy Mahindra Logistics, target price Rs 550: ICICI Securities

ICICI Securities has buy call on Mahindra Logistics with a target price of Rs 550. The current market price of Mahindra Logistics is Rs 530.05. Time period given by analyst is one year when Mahindra Logistics Ltd. price can reach defined target.

Mahindra Logistics Ltd., incorporated in the year 2007, is a Mid Cap company (having a market cap of Rs 3717.20 Crore) operating in Logistics sector.

Mahindra Logistics Ltd. key Products/Revenue Segments include Services Rendered for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 1078.37 Crore, down -3.76 % from last quarter Total Income of Rs 1120.50 Crore and up 10.19 % from last year same quarter Total Income of Rs 978.65 Crore. Company reported net profit after tax of Rs 11.11 Crore in latest quarter.

Investment Rationale
Mahindra Logistics (MLL) witnessed an impressive margin recovery in Q4FY22 as the effect of higher labour costs normalised across geographies and optimisation costs of the Bajaj contract also moderated. Gross margins improved 110bps QoQ to 10%, despite a QoQ decline in warehousing yield (area under management went up 0.3mn sq. ft. QoQ with second warehouse in Luhari commissioned). Drop in QoQ warehousing yield in Q4 is indicative of bumped up ecommerce revenues in Q3 and doesn’t highlight any particular trend. Non Mahindra warehousing revenues were up 68% YoY, largely driven by e-commerce, consumer and freight forwarding businesses. With ~ 1.7mn. sq. ft. of Build to Suit (BTS) warehousing space addition and ~2mn. sq. ft. reduction in yard area management YoY in FY22, it is seeing a gradual uptick in warehousing yields. Q4FY22 results were prospective, and with a normalised valuation.

Promoter/FII Holdings
Promoters held 58.18 per cent stake in the company as of 31-Mar-2022, while FIIs owned 20.39 per cent, DIIs 12.13 per cent.