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Motilal Oswal Report
After slow growth in FY24 and Q1 FY25, demand is expected to pick up for the express logistics segment. Long-term growth is expected to be primarily driven by increasing urbanisation, rising consumer demand, and changing consumer preferences toward faster delivery.
Blue Dart Express Ltd. is making strategic investments in infrastructure and network expansion. The surface logistics segment is expected to grow faster than the air express business and the company is positioning itself for capitalizing on the opportunity.
In air express, Blue Dart has added two new aircraft to cater to tier-II and tier-III cities as it sees a healthy demand outlook in these cities for the long term. The two new aircraft have replaced third-party volume with in-house operations. The share of third-party cargo has declined from 20-25% to 10-11% currently.
The Guwahati route is still ramping up and the new aircraft are expected to break even in the next few quarters.
Blue Dart's investment in surface express is backed by ~two times higher growth witnessed in surface express volumes in Q1 FY25 than air volumes. With an increasing market share of Blue Dart in the surface express segment, along with network expansion, we expect the company to register a CAGR of ~17%/32%/36% in revenue/Ebitda/profit after tax over FY24-26.
We maintain our Buy with a target price of Rs 9,500 (based on 24 times FY26E enterprise value/Ebitda).
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