Revenue growth on firm path; margin to follow • BlueDart :: ICICI Securities, report

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Revenue growth on firm path; margin to follow • BlueDart (BDE) reported a spirited set of numbers with revenues posting 16.5% YoY growth while QoQ it remained flattish at | 589 crore • EBITDA growth for the quarter stood at 6.6% YoY to | 48.4 crore. However, QoQ it declined ~4%. The EBITDA margin for the quarter stood at 8.2%, a decline of 76 bps YoY and 48 bps QoQ. The EBITDA margin contracted on account of nearly | 9 crore charges for the overhaul of the aircraft engine. Excluding this one-time expense, the EBITDA margin for Q3FY15 stood at 9.7% • Further, PAT growth for the quarter remained fairly strong at ~18% YoY whereas it declined ~12% QoQ to | 27.1 crore BlueDart maintains pole position in Indian express industry The express industry is estimated at ~| 17000 crore in FY15 and is expected to grow at an average rate of 17% to ~| 27000 crore by FY18. Organised players together with postal department constitute 72% market share whereas 15% is held by semi-organised players and residual with other smaller players. The organised segment of the express industry constitutes 48%, which is further segregated into air express (AE) and ground express (GE). The organised air express industry is ~| 3360 crore whereas ground express has a market size of ~ | 4830 crore. BlueDart with 52% market share in AE is an undisputed leader followed by 16% market share in GE. Wide bouquet of products coupled with superior technology and network A strong fleet of six aircraft and 8685 vehicles covering 34,257 locations via 20 ground hubs and 166 network routes provides a significant competitive edge to BDE. Further, with a wide band of innovative products like time and day definite solution and packaging solutions, BDE ensures end-to-end logistics solution provision for its clientele. Also, BDE’s pioneering technology along with 19 core offerings and value added services cover a gamut of industry requirements. E-tailing and revival in economy to drive growth The e-tailing business in India grew at a CAGR of 56% over FY08-13 and is expected to maintain strong growth momentum of 54% over FY13-16. With the continuous increase in internet penetration (currently around 11%) and growing use of smart phones and tablets, e-tailing growth is expected to get accentuated in non-metro cities as well. Currently, BDE derives ~18% revenue from e-tailing business and, going ahead, it anticipates an orbital shift in revenue trajectory being driven by tier-II and tier-III cities business growth. BDE largely derives revenue from its institutional client base (96%) whereas the remainder belongs to retail customers. Strong growth traction to keep valuation upbeat With the economy set to gather steam, BDE coupled with a strong balance sheet and debt-free capital structure is well equipped to ride out the next growth cycle in the economy. Also, as the economy improves, together with strong growth in e-tailing segment coupled with operating leverage on enhanced package volume, BDE is expected to see a sharper growth in earnings. Subsequently, we roll over our estimates to FY17E and arrive at our discounted cash flow based valuation target price of | 7740. We maintain BUY recommendation on the stock.

LINK
http://content.icicidirect.com/mailimages/IDirect_BlueDart_Q3FY15.pdf