Delhivery volume growth and Ecom Express integration support outlook despite near-term margin pressure

Investment View and Valuation

In its 9 August 2026 1QFY27 result update, Motilal Oswal Financial Services Limited (MOFSL) retained its Buy rating on Delhivery and raised/revised its DCF-based target price to Rs 570, compared with a CMP of Rs 473. The constructive view is supported by strong momentum in the core Express Parcel and Part Truckload (PTL) businesses, market-share gains, Ecom Express integration and a path to improved profitability as temporary cost pressures are passed through.

MOFSL expects Delhivery to deliver revenue and EBITDA CAGRs of 13 per cent and 32 per cent, respectively, over FY26-FY28.

1QFY27 Financial Performance

The earnings miss reflected higher labour costs following minimum-wage revisions in Haryana, Karnataka, Uttar Pradesh and Punjab, reduced labour availability during elections, and higher fuel costs because fuel-cost pass-through operates with a one-month lag.

Core Transportation Businesses Maintain Strong Momentum

Express Parcel shipment growth was supported by the integration of Ecom Express. PTL margins improved due to better yields and a favourable client mix, despite the broader cost pressures.

Cost Pass-Through and Growth Outlook

Management said wage inflation had a larger effect than fuel costs because labour expenses do not have an automatic contractual pass-through. It expects wage-related price revisions to be implemented without significant delay, as statutory wage increases are industry-wide. The resulting cost pass-through should be reflected in 2QFY27.

Management estimated that normalised EBITDA, before the impact of wage increases and higher fuel prices, would have been Rs 350-400 million higher in 1QFY27.

• Delhivery expects Express business growth of 20-30 per cent in FY27.
• PTL growth is expected at 18-22 per cent in FY27.
• The company targets service EBITDA margins of 16-18 per cent for both businesses over the next two years.
• The company ended 1QFY27 with 54,096 active customers and said it is gaining share from third-party logistics competitors as well as customers' in-house logistics operations.

Ecom Express Integration and Capital Intensity

The Ecom Express acquisition has strengthened Delhivery's network footprint, consolidated the market, and added automation assets and infrastructure. Delhivery incurred Rs 170 million of Ecom Express integration costs in 1QFY27, but management said integration is largely complete and does not expect meaningful further costs.

Major capital expenditure was completed during FY22-FY25. This included fleet expansion from 299 to 1,741 vehicles and the development of mega-gateways at Tauru, Bhiwandi and Hoskote. Capital intensity declined from 6.8 per cent of revenue in FY22 to 4.7 per cent in FY26, and management expects it to moderate to about 4 per cent over the next eight quarters. Corporate overhead is targeted at 6-7 per cent of revenue over the medium term.

Supply Chain Services and New-Service Optionality

Supply Chain Services revenue declined about 3 per cent year on year to Rs 2 billion as Delhivery exited unprofitable contracts. Its service EBITDA margin fell because of wage and fuel costs, as well as ramp-up costs for two large contracts. Management expects a sharp improvement within 45-60 days as volumes build.

New-service optionality includes Delhivery Direct, an on-demand logistics offering, and Rapid, a dark store-led same-day fulfilment service. Rapid operates 23 dark stores in four cities, and management is targeting about Rs 1 billion of medium-term rapid-commerce revenue.

Estimates and Key Risks

MOFSL reduced its FY27 EBITDA estimates by 8 per cent after the first-quarter margin shortfall but retained its FY28 estimates.

Key thesis risks include:

• Sustained wage or fuel-cost pressure.
• Delayed customer price revisions and cost pass-through.
• Weaker volume momentum.
• A slower-than-expected recovery in service and corporate-cost margins.