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MOSL: BLUE DART EXPRESS (Neutral)-Focus on increasing share of Ground Express

BLUE DART EXPRESS: Focus on increasing share of Ground Express

(BDE IN, Mkt Cap USD2b, CMP INR6468, TP INR7390, 14% Upside, Neutral)

 

• We recently released our , wherein we stressed upon the superlative growth potential of the Indian Logistics sector and the opportunities for the organized players like Blue Dart Express (BDE). We had assigned a Neutral stance on the stock owing to its rich valuation.
• The unparalleled network presence of BDE and strong growth in Express cargo would drive consistent growth in volumes across its offerings over the next few years. With the easing of fuel prices (on account of tax cuts), margin is expected to remain at elevated levels in the near term.
• BDE is looking to increase its contribution from Ground Express segment from current levels of ~30%. We expect BDE to clock a revenue/EBITDA/PAT CAGR of ~17%/18%/36% over FY21-24E and retain our Neutral rating, with a revised TP of INR7,390/share (27x FY24E EV/EBITDA).

 Strong festive demand drives volumes in 2QFY22

• BDE registered a 30% YoY revenue growth in 2QFY22, driven by strong festive season demand and some impact of pent-up demand, with e-commerce being the highest contributor to growth, followed by Electronics and Pharma.
• The Ground Express segment grew faster than Air Express, taking the revenue share from Ground/Air to ~30/70, with the e-commerce segment contributing 20% of the pie.
• The Document Delivery business was badly impacted during the COVID-led lockdown. With the Education and BFSI sectors opening up, volumes are improving and have almost reached pre-COVID levels.