Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mahindra Logistics Ltd (NSE:MAHLOG, Financial) reported a 10% increase in revenue for Q1 FY25 compared to the same quarter last year, reaching INR 1,420 crores.
- The company secured several key orders, including contracts with a large international personal care cosmetics company and a leading e-commerce marketplace.
- The launch of a new 300,000 square feet multi-client facility in Guwahati, the largest of its kind in the Northeast, powered entirely by renewable energy.
- The company has completed over 13 million green miles, indicating significant progress in its EV penetration and sustainability efforts.
- The formation of a joint venture with Japan's leading auto logistics company, China Holding, to focus on Japanese automotive OEMs, which is expected to start showing results by the end of the financial year.
Negative Points
- PAT for Q1 FY25 was INR 10.2 crores, a significant decrease of approximately 54% compared to INR 23 crores in Q1 FY24.
- The company's gross margin on a fully consolidated basis decreased from 10.5% in Q1 FY24 to 9.5% in Q1 FY25, impacted by higher labor costs and extended start-up periods.
- The Express business, particularly the Rivigo segment, continues to face challenges with quarter-on-quarter flattish profitability and ongoing losses.
- The warehousing segment experienced a drop in yield to INR 6.2 per square foot, impacted by pre-operating costs and higher labor expenses.
- The company faced a mixed demand environment, with some categories affected by election-related slowdowns and slower consumption, impacting volumes in B2B Express and last-mile delivery businesses.
Q & A Highlights
Q: Hi, this is Alok Deora from Motilal Oswal. So with respect to the MLL Express business, which is the Rivigo business, we have seen kind of quarter-on-quarter flattish profitability. Could you just indicate how we are looking at breakeven now?
A: Thanks, Alok. Certainly, if you look at the numbers, it was a difficult quarter for the industry and for us. Despite a reduction in volume, we showed an improving operating performance. Contribution margin grew by around 300bps. We are planning for a 10% to 15% improvement through the quarter, which should bring us close to our EBITDA breakeven target. However, there is a risk of slippage, and we might see breakeven by the middle of Q3.
Q: Hi, this is Amit Dixit from ICICI Securities. My question is on your warehousing yield. The yield was INR6.2 per square foot, impacted by pre-operating costs of new launches. When can we return to Q1 FY24 levels?
A: We believe the anchor for the business is around INR7. The 6.2 reported was impacted by higher pre-operating expenses and labor costs. We expect to be back to around INR7 by the end of Q3, with ongoing optimization efforts.
Q: Hi, this is Krupashnkar NJ from Avendus Spark. Given the subdued environment, are you seeing the industry pricing environment softening?
A: It is a tough market with intense price pressure, especially on the enterprise side. We are maintaining yields through our strong retail network, which helps balance some of the pressure. However, there is a real challenge in terms of timing yield.
Q: Hi, this is Aditya Mongia from Kotak Securities. Can you give us a sense of the scale of your EV business in terms of revenues and break-even revenue per day per vehicle?
A: We operate around 1,600 vehicles, mostly three-wheelers. We aim for INR1,100 to INR1,300 per day in revenue per vehicle, with an 18% to 20% gross margin. The business is EBITDA positive, and we are targeting further expansion in four-wheelers and two-wheelers.
Q: Hi, this is Alok Deora again. From a longer-term perspective, how are you looking at the Express segment given the challenges and losses incurred?
A: Strategically, we believe in the long-term growth of the Express segment as part of our integrated solutions. While there is a risk of not meeting our breakeven targets immediately, we are focused on optimizing and scaling the business. The acquisition has given us a jump start, and we are committed to turning it around.
Q: Hi, this is Amit Dixit again. You mentioned a 15% volume growth target for the Express logistics business. Which sectors do you see contributing to this growth?
A: We expect half of the growth to come from FMCG and the other half from existing accounts in the 3PL contract logistics segment, leveraging synergy opportunities.
Q: Hi, this is Krupashnkar NJ again. How do you see the overall e-commerce piece shaping up for the company over the next year?
A: E-commerce had a mixed impact last year, with contract logistics declining but last-mile delivery showing growth. We are focusing on new geographies, complex offerings like grocery, and expanding new accounts. We expect e-commerce to contribute 15%-16% of our revenue in contract logistics this year.
Q: Hi, this is Aditya Mongia again. On the B2B Express business, you mentioned some downtrading. How much of the revenue has been affected, and what's the reason behind it?
A: Compared to last year, we are up by 6%. We dropped around 13%-14% due to performance issues and account downgrades but clawed back 18%-19% through new accounts and increased share in existing accounts. The net effect is a 6% growth.
Q: Hi, this is Aditya Mongia again. Is the issue of performance-linked downtrading continuing?
A: Churn due to performance issues has been less than 1% of our revenue in the last two quarters. We have had some commercial losses due to pricing pressures, but overall, performance-related churn is minimal.
Q: Hi, this is Aditya Mongia again. On labor costs in the warehousing business, is this becoming a periodic issue?
A: Automation and improving productivity are key solutions. The challenge has been more pronounced in certain geographies and due to higher absenteeism. We are investing in workforce retention and training programs to address this issue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
