JM says Delhivery will see significant re-rating & is a BUY for TP of ₹450
Posted: Tue Jun 24, 2025 7:53 pm
While Delhivery has outperformed the market since announcing the acquisition of Ecom Express, we believe the uptick only reflects the benefits of consolidation. We expect significant re-rating considering the subdued headwinds over the coming year – 1) plateauing of Meesho’s insourcing at c.65%, and 2) rise in e-commerce shipments. Furthermore, we expect FY26 to see the peak impact of channel shift towards Quick Commerce and the impact would start tapering FY27 onwards. A combination of waning headwinds and benign competition (only Delhivery and Shadowfax remain relevant) at an attractive valuation of c.22x FY27E Adj. EBITDA help support our BUY rating with a Jun’26 TP of INR 450.
Expect Meesho’s insourcing to plateau in FY26:
As per Meesho’s FY24 annual report, the company saw volume growth of 35% in 9MFY25 with our channel checks suggesting the company ended Mar’25 at about 65% insourcing (c.50% for FY25) via Valmo. In FY26, Meesho is likely to deliver sharper volume growth (40%+) as it gains market share from other major e-commerce platforms, which are resorting to platform fees in order to deliver profitability. Hence, Valmo needs to ramp-up capacity significantly just to maintain insourcing at 65%. Furthermore, a combined Delhivery plus Ecom Express would be able to pass on cost benefits to Meesho that would also lower the incentive to further increase insourcing. It is important to note that Meesho is scaling Valmo solely for the sake of growth in its e-commerce business.
Competitive intensity in 3PL Express Parcel segment turning benign:
India’s 3PL express parcel market is undergoing a structural shift, entering a phase of consolidation and rationalisation. Delhivery’s recent acquisition of Ecom Express has significantly strengthened its market position, improved regional reach and added scale to its operations. This move comes at a time when Xpressbees, once considered a formidable competitor, is witnessing operational headwinds as well. The company has been struggling with scale inefficiencies, similar to those at Ecom Express, raising concerns about its ability to sustain competitiveness in a rapidly evolving logistics market. As a result, the competitive landscape is starting to bifurcate, with Delhivery emerging as the most dominant, full-stack, tech-led logistics provider, while Shadowfax is gaining ground as a fast-growing, asset-light player with modular servicing capabilities enabling growth in value-added services and quick-commerce (QC) logistics. Other players are gradually ceding ground as the market rewards speed, efficiency, and network density.
Ecom Express acquisition to enable 28% rise in Delhivery’s FY27E Adj. EBITDA:
We have triangulated the impact of Ecom’s acquisition in the following exhibits. As per Delhivery’s 4QFY25 earning call, management believes to retain ~30% of Ecom Express’s volumes. As shown in exhibit 1, in 9MFY25, ~60% of Ecom’s revenue came from Meesho. Assuming lower realisation of INR 46 due to pricing pressure from Meesho, Ecom’s realisation (ex-Meesho) is likely to be ~INR 58.8 in 9MFY25. As we assume Meesho shipments for Ecom Express to drop to zero, we use ex-Meesho realisation to calculate impact. As highlighted by Delhivery management, capacity utilisation is expected to improve in Delhivery’s network and hence service EBITDA accretion would be visible across the ecosystem while incurring minimal rise in corporate costs. We expect that barring impact of incremental one-time integration cost of INR 3bn in FY26, Ecom acquisition will lead to 32%/28% increase in Delhivery’s Adj. EBITDA in FY26/FY27.
Expect Meesho’s insourcing to plateau in FY26:
As per Meesho’s FY24 annual report, the company saw volume growth of 35% in 9MFY25 with our channel checks suggesting the company ended Mar’25 at about 65% insourcing (c.50% for FY25) via Valmo. In FY26, Meesho is likely to deliver sharper volume growth (40%+) as it gains market share from other major e-commerce platforms, which are resorting to platform fees in order to deliver profitability. Hence, Valmo needs to ramp-up capacity significantly just to maintain insourcing at 65%. Furthermore, a combined Delhivery plus Ecom Express would be able to pass on cost benefits to Meesho that would also lower the incentive to further increase insourcing. It is important to note that Meesho is scaling Valmo solely for the sake of growth in its e-commerce business.
Competitive intensity in 3PL Express Parcel segment turning benign:
India’s 3PL express parcel market is undergoing a structural shift, entering a phase of consolidation and rationalisation. Delhivery’s recent acquisition of Ecom Express has significantly strengthened its market position, improved regional reach and added scale to its operations. This move comes at a time when Xpressbees, once considered a formidable competitor, is witnessing operational headwinds as well. The company has been struggling with scale inefficiencies, similar to those at Ecom Express, raising concerns about its ability to sustain competitiveness in a rapidly evolving logistics market. As a result, the competitive landscape is starting to bifurcate, with Delhivery emerging as the most dominant, full-stack, tech-led logistics provider, while Shadowfax is gaining ground as a fast-growing, asset-light player with modular servicing capabilities enabling growth in value-added services and quick-commerce (QC) logistics. Other players are gradually ceding ground as the market rewards speed, efficiency, and network density.
Ecom Express acquisition to enable 28% rise in Delhivery’s FY27E Adj. EBITDA:
We have triangulated the impact of Ecom’s acquisition in the following exhibits. As per Delhivery’s 4QFY25 earning call, management believes to retain ~30% of Ecom Express’s volumes. As shown in exhibit 1, in 9MFY25, ~60% of Ecom’s revenue came from Meesho. Assuming lower realisation of INR 46 due to pricing pressure from Meesho, Ecom’s realisation (ex-Meesho) is likely to be ~INR 58.8 in 9MFY25. As we assume Meesho shipments for Ecom Express to drop to zero, we use ex-Meesho realisation to calculate impact. As highlighted by Delhivery management, capacity utilisation is expected to improve in Delhivery’s network and hence service EBITDA accretion would be visible across the ecosystem while incurring minimal rise in corporate costs. We expect that barring impact of incremental one-time integration cost of INR 3bn in FY26, Ecom acquisition will lead to 32%/28% increase in Delhivery’s Adj. EBITDA in FY26/FY27.