Shares of the recently-listed Delhivery jumped sharply on Thursday, as Credit Suisse gave a thumbs up to the company despite it reporting a loss. The stock rose as high as ₹617.70 (or 15 per cent) on the BSE in early deal, but gave up part of the gains due to profit-taking. Delhivery closed the day 6.3 per cent higher at ₹570 over the previous day’s close of ₹536.

Credit Suisse has initiated coverage on Delhivery with an Outperform rating and a target price of ₹675. However, analysts are divided over Delhivery performance in the short term, some even advising investors to wait and watch, before revenue clarity on revenue growth and profitability emerges.

For Q4-FY22, Delhivery posted a loss of ₹130.58 crore, slightly higher than the loss of ₹118.25 crore the company reported in the same quarter of the last fiscal. However, revenues for the quarter doubled to ₹2,127.02 crore ( ₹1,031.76 crore).

IIFL Securities initiated its coverage on Delhivery with Sell, as valuations seem to be building in the seamless strategy execution, rapidly scaling up revenues, containing costs, cutting yields and, yet, turning profitable in a sustainable manner. The domestic brokerage set a 12-month target price of ₹442.

Credit Suisse’s 6 reasons

Credit Suisse has initiated coverage on Delhivery with an Outperform rating and a target price of ₹675, based on: favourable industry structure; structural growth (over 30 per cent) in e-commerce volumes; strong moat and leadership in extant scale, network and technology; recent break-even, with incremental growth aiding profitability synergistically; diversified growth (e-commerce + broader logistics); and potential merit as an internet play vs others.

Loss widens

It may be recalled that the shares of the supply chain major got listed on the bourses on May 24 after it successfully raised ₹5,235 crore through its initial public offering, of which ₹4,000 crore was fresh issue. It plans to use ₹2,000 crore of the proceeds in funding growth initiatives, ₹1,000 crore towards inorganic growth through acquisitions or strategic alliances and ₹1,000 crore for general corporate purposes.

Parth Nyati, Founder, Tradingo, said despite the cash profits, the cash flows from operations have seen a significant decline. “Further, the frequent use of adjusted EBITDA and adjusted cash profits makes it difficult to comment on the actual profitability. So, we recommend investors wait for a few quarters to analyse how the business evolves in terms of revenue growth and profitability,” he added.

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