Mahindra Logistics (MAHLOG IN) has received an Accumulate rating from Prabhudas Lilladher Research, with a target price of Rs386. The report highlights early signs of revival in the B2B express business post-acquisition, a healthy revenue growth trajectory, and EBITDA margin expansion prospects over the next three years. Despite a mixed quarterly performance marked by higher depreciation and interest costs due to new warehouse leases and accounting standards transition, the company’s fundamentals show promise. Investors should watch key trading levels closely as the stock demonstrates resilience backed by operational improvements and a strengthened balance sheet post-rights issue.

Prabhudas Lilladher Calls Mahindra Logistics 'Accumulate'

The research house recommends an accumulate stance on Mahindra Logistics with a target price set at Rs386, valuing the stock at approximately 23x the September 2027 estimated EPS. The rationale is predicated on expected revenue CAGR of 15% over FY25 to FY28E and a 160 basis points expansion in EBITDA margin amid warehouse space leasing and operational leverage gains.

Q2FY26 Earnings Highlight Mixed Performance

In the quarter ended September 2025: - Consolidated revenue rose 10.8% YoY to Rs16,853 million but fell short of estimates by 4%. - Gross margin improved slightly to 14.2% from 14.1%. - EBITDA surged 28.2% YoY to Rs851 million, beating estimates by 7.7%, driven primarily by narrowing losses in the B2B express segment. - The bottom-line remained in the red with a loss before minority interest of Rs83 million, impacted by elevated depreciation (up 33% YoY to Rs717 million) and high interest charges of Rs217 million. - The B2B express segment showed promising volume growth of 7.2%, with yield improvement of Rs0.9 per unit, signaling early operational recovery. - Continued business expansion is evident from new facility launches in Nashik and warehouse expansions in Guwahati and Agartala.

Operational Highlights and Strategic Initiatives

- The company has successfully reduced unabsorbed whitespace in warehouses by 20% in 2QFY26 and targets a further 95% absorption by September 2026. - Mahindra Logistics plans to invest Rs500 million in its B2B express subsidiary, MLL Express, to accelerate profitability. - Growth in the mobility segment includes the launch of a premium tech-enabled B2C service, Alyte Prive, in the NCR, with expansion plans for Noida International Airport. - Warehousing revenue increased to Rs3,330 million in 2QFY26, up from Rs2,780 million a year ago. - Debt stands reduced at Rs725 million in the first half of FY26, bolstering the company’s balance sheet.

Financial Metrics and Future Projections

The company’s broader financial outlook remains robust:

The EPS is expected to nearly triple in FY27 fueled by margin expansion and volume growth. Return ratios and free cash flow are also anticipated to strengthen, reflecting improving capital efficiency and operational cash generation.

Key Stock Levels and Investment Targets

- Current Market Price (as of report date): Rs344 - Target Price: Rs386 based on the 23x Sept-27 EPS valuation multiple - Key Support Levels: Rs320-330 zone, supported by recent consolidation. - Resistance Levels: Immediate overhead resistance near Rs360, with a medium-term breakout potential towards Rs386 target. - Recommendation: Accumulate with a long-term view, leveraging improving fundamentals and sector tailwinds.

Risks and Considerations for Investors

- Elevated lease rentals and depreciation expenses due to recent and ongoing warehousing expansions are likely to keep profitability under pressure in the near term. - The migration to Ind AS 116 accounting has inflated interest and depreciation costs impacting net earnings. - Economic or logistics sector disruptions could hamper volume growth and margin improvement. - Client bankruptcy provisions, such as the recent Rs48 million charge, represent operational risks to watch.

Bottomline

Mahindra Logistics stands at a critical juncture with early signs of revival in its B2B express business and strategic expansion in warehousing and mobility segments. The report’s Accumulate call reflects confidence in sustained revenue growth, margin improvement, and strengthened financial position post-rights issue. Investors with a moderate risk appetite should consider accumulating this stock ahead of expected operational leverage and sector growth catalysts. The Rs386 target provides approximately 12% upside potential from current levels, making it an attractive proposition in the logistics space. Vigilance on cost inflation and execution risks remains paramount.