Mid-cap stock to buy: HSBC sees 20% upside despite base-building performance. Here's why

Delhivery share price has been lacklustre over the last year, gaining nearly 3 per cent. However, global brokerage firm HSBC remains positive about the stock's prospects and sees a 20 per cent upside potential in it. In its fresh report earlier this week, HSBC maintained a buy call on the stock and kept the target price unchanged at ₹500, implying a 20 per cent upside.

"We like Delhivery for its dominant position with superior economics in high growth e-commerce logistics industry. We retain our Buy rating on the stock as we see the company as dominant in India's structurally high-growth e-commerce logistics market. Delhivery trades 33 times FY27E PE, and our target price implies nearly 40 times PE," HSBC said.
Why is HSBC positive about Delhivery?
The global brokerage firm compared India’s two largest third-party e-commerce logistics companies- Delhivery and Ecom Express. For Ecom Express, which is not listed on exchanges, HSBC sources data from its recently filed Draft Red Herring Prospectus (DRHP).

According to HSBC, Delhivery’s cost economics are far superior to those of its closest peer in the express parcel business, which accounts for nearly 60 per cent of its revenue. The global brokerage firm observed that this is not reflected in Delhivery’s consolidated profitability, as the remaining revenue comes from early-stage businesses, which are currently loss-making at an adjusted EBITDA level.

Delhivery’s business is more diversified across the logistics services and customers, while Ecom is focused mostly on the e-commerce express market.

"Delhivery’s Express Parcel business revenue is now 2.2 times that of Ecom Express in FY24, and overall revenue is 3.1 times. Delhivery’s Express Parcel business adjusted EBITDA margin is at least about 8ppts higher than that of Ecom Express," HSBC underscored.

"With the exception of FY23, Delhivery’s Express Parcel revenue growth has been higher than that of Ecom in each of the last five years," the brokerage firm added.

Delhivery saw a net profit of ₹54.35 crore for the April to June quarter of the financial year 2024-25. Its revenue from operations rose 12.56 per cent to ₹2,172.30, compared to ₹1,929.78 in the same period last year.