Blue Dart - Margins To Improve With Better Capacity Utilisation: Motilal Oswal

Motilal Oswal Report

The recently acquired two 737-800 aircraft have been integrated into the existing aircraft network (Blue Dart Express Ltd. realized revenue from these new aircraft only during the last 10 days of Q1 FY24). Starting from Q2 FY24, we expect capacity utilisation to improve significantly. As a result, we anticipate improved margin performance from the second quarter onwards.

Ebitda margins faced challenges as aviation turbine fuel prices did not correct in line with Brent prices. However, over the last several months, the disparity between Brent and ATF prices has reduced, which should support margins.

Blue Dart enjoys a ~60% market share in the organised Air Express segment (as of FY22) and has been gaining market share in the Surface Express segment (~30% of total revenue), which is expected to grow at twice the rate of air express industry.

The company continues to focus aggressively on the Surface express segment, which should support volume growth in the near to medium term.

With the upcoming festive season, improved utilisation of new aircraft and expansion of branch network, volumes are expected to register a compound annual growth rate of 13% over FY23-25. We expect Ebitda margins to gradually improve to 13% in FY25 with better capacity utilisation and reducing disparity between Brent and ATF prices.

We reiterate our 'Buy' rating with a target price of Rs 7,840 (premised on 20 times FY25E enterprise value/Ebitda).

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