The B2C business is seeing temporary vs structural slowdown, the broker reportedly stated adding that B2B ramp-up will be done with profitability focus.

The brokerage believes current stock price factors in 6-8% express parcel growth in the next 3-5 years as against 25% plus levels in the past. B2B growth prospects, operating leverage & low e-comm penetration are being underestimated, it added.

The Delhivery stock hit a record low of Rs 317 on 23 November 2022. It entered bourses on 24 May 2022. The scrip was listed at Rs 493, a premium of 1.23% to the initial public offer (IPO) price of Rs 487. The IPO of Delhivery was subscribed 1.63 times. The issue opened for bidding on 11 May 2022 and it closed on 13 May 2022.

The stock is currently trading at a discount of 32.29% to the IPO price.

The recent selling was triggered by subdued Q2 business update announced on 19 October 2022. Delhivery informed the bourses that it anticipated moderate growth in shipment volumes through the rest of the financial year.

In its Q2 business update, the company said that market sentiment in Q2 continued to remain broadly unchanged from Q1. Consumer discretionary spending remained muted due to continuing high levels of inflation, with average user spends and total active shoppers remaining flat or lower during the ongoing festive season, as per the industry reports.

It added that Express Parcel volumes remained stable in Q2 and picked up towards the end of the quarter, driven by festive season sales, especially in the Heavy Goods category. Overall service line volumes for the business grew in the high teens in Q2FY23 over a large base of the same quarter last year (Q2FY22).

"Going forward we remain watchful of the market sentiments. We have made sufficient capacity investments in FY22 and early FY23 to sustain our current rate of growth and expect new mega-gateway and sorter decisions only by early FY24. As inflationary pressures and service disruptions due to monsoon ease across the country we expect improvement in volumes, revenue and service margins going forward," it said.

Delhivery is the largest and fastest growing fully-integrated player in India by revenue in Fiscal 2021. It provides a full suite of logistics services such as express parcel transportation, PTL freight, TL freight, cross-border, supply chain, and technology services.

Delhivery reported revenue from services of Rs 1,796 crore in Q2FY23, up 22% YoY from Rs 1,474 crore on a reported basis and up 9% YoY from Rs 1,644 crore on a pro forma basis in Q2FY22. Loss after tax in the same period narrowed from Rs 643 crore in Q2FY22 on a pro forma basis to Rs 254 crore in Q2FY23.