Why Mahindra Logistics Share Price is Falling

In 2023 so far, majority of logistics stocks in India have seen a sharp fall in their share price due to supply chain disruptions and a decline in delivery orders due to rising inflation.

There's Blue Dart Express which has seen a sharp fall and then there's Allcargo Logistics, which has declined over 20% in the past couple of days.

Performance of Logistics Stocks in 2023 so far

Company	CMP (Rs)	Change (%)
Mahindra Logistics	377	-24.9
Blue Dart Express	1,609	-20.6
Tiger Logistics	380	-19.1
TCI Express	1,518.7	-16.5
Allcargo Logistics	349	-14.1
VRL Logistics	527.4	-4.3

Source: Equitymaster

Mahindra Logistics share price has been the hardest hit. It is one of the top 3PL solution providers in India.

The company's shares have plummeted 25% so far in 2023. In the past month alone, the stock is down 21%.

Let's find out why.

Poor Q3 results

For the December 2022 quarter, the Indian logistics solutions provider reported a 17% YoY rise in revenue to Rs 13.3 billion (bn).

This was driven by growth in the automotive and manufacturing segments. It reported revenue of Rs 11.4 bn in the same quarter last year.

Among the company's key segments, the revenue from 3PL and network services contributed 95% of the overall revenue.

Meanwhile the mobility business revenue rose marginally by 0.9% YoY.

While all may seem good on the revenue side, the company's profits fell 21.5% as costs ballooned.

The company's consolidated net profit after tax fell to Rs 13.9 million (m) for the December 2022 quarter, compared with Rs 17.7 m a year earlier.

Its overall expenses rose 17.3% YoY to Rs 13.3 bn, mainly due to higher operational costs.

Another reason profit was dwindled was because of rising fuel prices and wages, along with a softer demand environment in consumer and e-commerce businesses.

The company also flagged weakness in its freight forwarding service due to a sharp drop in freight rates.

Muted outlook due to falling freight rates

The freight forwarding business accounts for the biggest chunk of Mahindra Logistics' network services division.

This segment witnessed a major slowdown in Q3, with global slowdowns and capacity overhangs resulting in strong pricing corrections with ocean prices for both export and import.

In the past two months, container companies have seen freight rates decline by up to 70% to 75%.

After constantly increasing to record levels since the second half of 2020, freight rates came under pressure post the Russia-Ukraine conflict, when fears of the economic fallout started to dampen consumer sentiment.

These rates remained steady at record highs in the September 2022 quarter but started to decline in the December 2022 quarter before showcasing a steep fall at the year's end.

Mahindra Logistics was unable to overcome this pricing adjustment in the quarter, dragging the profits down.

This lowering freight cost was coupled with reduced demand between the United States and Europe, resulting in fewer sailings.

The company expects this problem to continue for the short term and anticipates a full recovery in the volume growth in the next six months.

How shares of Mahindra Logistics have performed recently

Mahindra Logistics share price is down 6.5% in the past five days, while over the past one month, the stock has fallen 22.1%.

So far in 2023, shares of the Mahindra Logistics have declined by 24.8%.

Mahindra Logistics touched its 52-week high of Rs 567 on 23 September 2022 and its 52-week low of Rs 373.3 on 16 February 2023.

It is currently trading at a PE (Price to Earnings) multiple of 51.7x, with the industry PE ratio being 4.6x.

About Mahindra Logistics

Mahindra Logistics Limited is a portfolio company of Mahindra group.

It is an integrated third-party logistics (3PL) service provider specialising in supply chain management and people transport solutions.

The company serves over 350 corporate customers across various industries like automobile engineering consumer goods and e-commerce. The company pursues an 'asset-light' business model providing customised, and technology enabled solutions that span across the supply chain and people transport operations.

Through its logistics division, Mahindra Logistics provides logistics solutions warehousing, freight forwarding, and supply chain services.

For more details about the company, you can have a look at the Mahindra Logistics company fact sheet andquarterly results on our website.

You can also compare Mahindra Logistics with its peers:

Mahindra Logistics vs Aegis Logistics

Mahindra Logistics vs Allcargo Logistics

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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