Mahindra Logistics Limited (MLL) is a part of Mahindra & Mahindra group and works as a 3rd party logistics services provider. MLL was incorporated in 2007 and has become one of largest 3rd party logistics solutions providers in India. MLL follows an asset light business model in which most assets (vehicles and warehouses) are owned /provided by its business partners. The company operates in two business segments i.e. Supply Chain Management (SCM) and corporate People Transport Solutions (PTS).
At the upper end of the price band (Rs425-Rs429), the issue is priced at 66.2x and 50.8x of its reported and adj. FY2017 earnings. Due to its asset light model, there is no exact comparable peer; however, the thumb rule for any investment is growth and returns. MLL has exhibited CAGR of 15% and 25% in top-line and adj. bottom-line respectively, which is better than its players i.e. VRL logistics and Transport Corporation of India. In terms of returns, company has shown a better return profile (ROE & ROIC of 17.3% and 40% v/s. peer group avg. – 13% & 14% respectively). Based on its growth story, diversification strategy, strong parent repute and post GST attractiveness of the logistics sector, we assign Subscribe rating to the issue.
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