Mahindra Logistics’ Stock Jumps To Two-Year High After Bajaj Electricals Deal

Shares of Mahindra Logistics Ltd. rose to their highest in nearly two years after it signed a pact with Bajaj Electricals Ltd. for integrated logistics services.

The association marks one of the largest deals in the Indian logistics industry with a contract value in excess of Rs 1,000 crore over the next five years, Mahindra Logistics said in an exchange filing.

Under the agreement, titled 'Project Samriddhi', Mahindra Logistics will redesign and outsource Bajaj Electricals' entire logistics with storage optimisation, transportation management and inventory movement through technology and automation, the filing said.

Mahindra Logistics will also deploy a mix of dedicated long-haul fleets and local distribution trucks, enabled by the latest tracking technology and control tower operations. Bajaj Electricals will transition towards sustainable logistics using electric delivery trucks from EDel by Mahindra Logistics. The deal aims to achieve logistics cost saving in excess of 25%.

"Such large-ticket deal wins are prospective for profitability as margins of 9-10% can add almost Rs 20 crore of Ebitda from a single contract," ICICI Securities said in a note. The research firm pegs FY22 and FY23 Ebitda at Rs 210 crore and Rs 300 crore, respectively, for Mahindra Logistics.

According to Dalal & Broacha, this is a big breakthrough for Mahindra Logistics and it will help further reduce the company's dependence on Mahindra's auto business. "This large deal will help Mahindra Logistics to showcase its capabilities and win more such orders in the third-party logistics space," the brokerage said in a note.

Mahindra Logistics, ICICI Securities said, is also best placed to incrementally win wallet share of customers. "Mahindra Logistics' business model has multiple pivots to ensure growth and augment an already attractive investment story."

Shares of Mahindra Logistics gained as much as 15% in early trade on Thursday to Rs 552.3 apiece — the highest since April 2019.

• Of the 14 analysts tracking the stock, 11 have a 'buy' rating, one suggests a 'hold' and two recommend a 'sell', according to Bloomberg data.
• The stock crossed its 12-month consensus price target of Rs 511.8 apiece on Thursday.

Shares of Bajaj Electricals, too, gained as much as 6.4% to a record high of Rs 1,099.8 apiece.

• The stock is up for the fourth straight day.
• Of the 14 analysts tracking the company, 13 have a 'buy' rating and one recommends a 'sell'.
• The stock also crossed its 12-month consensus price target of Rs 1,038.3 on Thursday.