Blue Dart Express - Expansion Of Fleet, Branch Network Bodes Well: Motilal Oswal

Motilal Oswal Report

Blue Dart Express Ltd. holds a significant market share of ~60% in the organised Air Express segment. This places the company in a favorable position to capitalise on the various business prospects available within the Express logistics industry.

The surface segment accounts for ~35% of Blue Dart's total revenue. This segment is experiencing robust growth, with double-digit expansion, surpassing the high single-digit growth observed in the Air segment.

Blue Dart provides the e-commerce industry with highly efficient solutions, which include enabling digital payments through 16 plus different digital wallets on their courier handheld machines.

Additionally, the company accepts credit and debit cards, offering convenient payment choices for their customers.

Valuation and view

• With lower aviation turbine fuel prices and a price hike in January 2023, Blue Dart’s margin is likely to stabilise in the 13-14% range.

• Blue Dart is actively pursuing the goal of boosting the Surface Express segment's contribution, which currently stands at 35%. The company anticipates that the Surface Express sector will experience twice the growth rate of the Air Express segment, primarily driven by the cost difference between the two.

• In response to the robust demand growth particularly from tier II and III cities/towns, Blue Dart has expanded its fleet in FY23 by adding two aircraft.

• We expect Blue Dart to clock a compound annual growth rate of 14%/21%/28% in revenue/Ebitda/profit after tax over FY23-25.

We reiterate our 'Buy' rating with a target price of Rs 8,250 (20 times FY25E enterprise value/Ebitda).

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