Delhivery turns corner with Q2 profit, 10% stock surge as margins improve

The rally followed an upgrade from Equirus Securities, which raised its target price to ₹505, reflecting optimism about revenue growth, margin expansion, and gains in express parcels and part truckload (PTL) services. The stock later settled at ₹415.40, lifting Delhivery’s market cap to ₹31,135.2 crore ($3.3 billion).

The profit turnaround, though modest, marks a turning point as the company moves from loss-making expansion to profitability. Adjusted EBITDA grew 48% year-over-year to ₹123 crore, with margins improving to 4% from 3.3%. More importantly, express parcel volumes surged 32.1% to 325 million shipments—exceeding the company’s own FY27 guidance of 20–30%—while PTL volumes rose 14.2% to 5.45 lakh metric tonnes, with revenue up 23.2%. Analysts attribute the outperformance to pricing adjustments and network efficiency, though inflation-linked rate hikes accounted for less than 30% of yield gains.

The results reflect Delhivery’s strengthening position in India’s fragmented logistics market. Operating revenue climbed 19.8% year-over-year to ₹3,066.4 crore, with sequential growth of 4.6%—a steady rise after crossing ₹3,000 crore in Q1. While freight and handling costs, its largest expense at ₹2,195.1 crore, rose 19.1%, the company expects transportation margins to expand by 130–150 basis points in FY27. Express parcel EBITDA margins are projected to reach 16–18% by year-end, and PTL margins are expected to exceed 15%, a significant improvement.

However, the profit picture is complicated. Delhivery’s acquisition of Ecom Express in FY26 skewed year-over-year comparisons: excluding the deal, net profit would have been ₹59 crore in Q2 FY26 and ₹62 crore in Q1 FY27. Total expenses also increased 14.2% to ₹3,093 crore.

Beyond core logistics, Delhivery is expanding into new areas. Its intra-city service, operating in eight major cities, saw its annualized revenue run rate double to ₹200 crore in Q2, with a revised FY27 target of ₹280 crore and a two-year goal of ₹800–1,000 crore. The company also approved a ₹36 crore investment in a fintech subsidiary focused on distributing financial products through its vendor network and co-lending partnerships. These moves align with logistics firms monetizing last-mile data and cash flows, though success depends on regulatory clarity and execution.

Automation is another key focus. The company has introduced AI tools that reduce costs in customer support and delivery validation, though specifics on savings remain limited. Its in-house robotics unit is developing autonomous mobile robots, with plans to deploy 100 self-built pallet vehicles by Q4 FY27. While still in early stages, these efforts suggest a long-term strategy to cut labor costs—a critical factor in a sector where wages and fuel prices fluctuate.

The stock’s reaction indicates investor confidence in Delhivery’s growth strategy. But risks remain. PTL margins, though improving, are sensitive to fuel costs and capacity utilization. Expanding into fintech and robotics also introduces new challenges in unproven areas.

What to watch next: Margin trends: Will Delhivery’s EBITDA margins reach 16–18% in express parcels by FY27-end, or will rising costs offset volume gains? Local and fintech growth: Can the intra-city service scale beyond eight cities, and how quickly will the fintech unit generate returns? Automation impact: Will the robotics and AI initiatives lead to measurable cost savings in FY28, or stay as pilot programs? Acquisition benefits: How soon will the Ecom Express integration drive growth in high-margin segments?

When we covered Delhivery’s first profitable quarter on October 30, we noted its revenue crossing ₹3,000 crore as a milestone. Today’s results suggest the turnaround is more than a one-time improvement—but whether it signals lasting profitability or a temporary uptick is still unclear. For now, investors appear optimistic about the outlook.

Sources: inc42.com