Mahindra Logistics - Entry In New Businesses To Keep Margins Under Check: Motilal Oswal

Motilal Oswal Report

Mahindra Logistics Ltd. is transitioning its business model from a pure third-party logistics player to a more integrated player with focus on network solutions— freight forward, busness-to-business express, etc. While this would need Mahindra Logisitcs to invest aggressively, we feel this may hurt the margin trajectory in the near to medium term.

Furthermore, the competitive landscape has intensified significantly in the 3PL space, making margin expansion more challenging. With ~75% of Mahindra Logistics’ business being low margin transportation, the overall margin expansion now may be gradual.

Recent acquisition of Rivigo’s B2B business could negatively impact margins as the business is currently loss making at Ebitda level. Though Mahindra Logistics is confident of turning it breakeven by Q1 FY24, we believe it could be challenging with the presence of established players in that segment.

In the medium term, Mahindra Logistics intends to increase the scale of network services and achieve faster turnaround of recent acquisitions. It remains focused on improving the revenue mix by increased share of non-Mahindra and Mahindra Ltd. revenues, warehousing revenues, and added services.

The company is looking to focus on cost optimisation and improve the efficiency and integration of mobility business solutions.

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