Delhivery share price tanks 9% after losses widen sharply in Q1; should you buy, hold or sell?

Delhivery share price tanked over 9 per cent on Wednesday after the company reported a net loss of Rs 399 crore for the quarter ended June 2022 as against a net loss of Rs 129.6 crore a year back. At the same time, the company’s revenues grew 32.5 per cent on-year to Rs 1,745.7 crore. Delhivery shares debuted on stock exchanges earlier this year on May 24 at Rs 493 apiece. The stock fell 9 per cent to hit an intraday low of Rs 583 on NSE today. The logistics company stock is currency trading 11 per cent up from its listing price. 

Should you buy, hold or sell Delhivery shares after Q1 results?

Brokerage firm Edelweiss Securities downgraded the Delhivery stock following its “feverish ~30% rally over the past two months and weak Q1FY23 results—the latter creates near-term uncertainty about FY23–24E profitability”. According to analysts at Edelweiss, while the ‘blip’ in the Q1 results does not dislodge Delhivery’s growth story, or its moat, the stock rally has rendered risk-reward unfavourable. The brokerage now has a ‘hold’ rating on the stock with a DCF-based target price of Rs 620, down from Rs 650 earlier. “Given Q1FY23 performance, we are cutting FY23–25E revenue by 6–7% and EBITDA and PAT estimates,” it said.

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Uphill task ahead of scaling businesses

Analysts at IIFL Securities remain sceptical as they believe that Delhivery faces an uphill task of scaling up each of its businesses, improving operating efficiency, passing on scale benefits to gain market share and yet earn ebitda/cash flows. “The 1Q performance is a part reflection of execution challenges, which may weigh high on Delhivery’s ambitions. Amazon’s proposed plans to acquire controlling stake in E-com express is a pivotal event for the sector, and Delhivery’s stock, which is pricing in seamless rampup without building in execution and business risks,” they said. The brokerage sees unfavourable risk-reward, and maintains a ‘Sell’ call with a target price of Rs 442 apiece.

Overall structure bullish till it trades above Rs 575-570

According to Santosh Meena, Head of Research, Swastika Investmart Ltd, the counter got bullish momentum after witnessing a breakout of high made on listing day. However, a pullback was seen post weak set of results. “The overall structure is bullish till it trades above the Rs 575-570 demand zone, therefore, one can look at this correction as a buying opportunity with a stop loss of Rs 550 where it may again head towards the Rs 700 level,” he said. 

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