Buy Blue Dart Express; target Rs 3256: GEPL Capital
Brokerage house GEPL Capital is bullish on Blue Dart Express (BDEL) and has recommended buy rating on the stock with a target price of Rs 3,256 in its July 03, 2013 research report.
July 05, 2013 / 18:41 IST
GEPL Capital's research report on Blue Dart Express (BDEL)
Blue Dart Express (BDEL), has reported 20 percent CAGR growth in volumes handled during CY07 - FY13 and 18 percent CAGR growth in volumes handled during CY10 - FY13. This demonstrates ability of the company to maneuver the global slowdown very efficiently. Also, revenue growth has been maintained at a robust 17 percent CAGR over CY07 - FY13 and 22 percent CAGR over CY10 - FY13. It has the most extensive domestic network covering over 33,742 locations, and service more than 220 countries and territories worldwide through its parent company DHL.Unbeatable Air express dominance supported by growing ground express concentration BDEL has seven aircraft in its fold which are leased from its parent, DHL. It has two Boeing 737s and five Boeing 757s. These are leased for a period of five years from the parent, DHL. It holds 48 percent market share in the air express segment in India and is the largest player in that segment in India. BDEL holds 16 percent market share in the Ground segment. It has warehouses at 68 locations across the country as well as bonded warehouses at the 7 major metros of Ahmedabad, Bangalore, Chennai, Delhi, Mumbai, Kolkata and Hyderabad. We expect BDEL's leadership position in the Indian market to continue driven by strong outlook for industries such as ECommerce, BFSI, Pharmaceuticals, Automobiles, etc.Robust Balance Sheet and Zero Debt status
BDEL is a zero debt company as per its latest financials on 31st March, 2013. It currently has cash of Rs 2.37 bn on its books and is free cash flow positive. BDEL has an asset light model. It has earmarked Rs 1,000 mn capex every year for the next two years which looks comfortable given the cash rich status of the company. Over CY10 - FY13, BDEL has reported 22 percent CAGR growth in Net Sales and 25 percent CAGR growth in PAT.Strong Parentage by way of DHL
BDEL is 75 percent owned by DHL (DHL Express Singapore Pte Ltd) which is one of the world's largest courier service companies. DHL is present in over 220 countries and territories across the globe, making it the most international company in the world and has workforce exceeding 285,000 employees. DHL ships 7 mn items around the world every day and has 80,000 vehicles globally. DHL had global revenues of almost $38 bn in 2011 and is the largest logistics company in the world by revenues. On an average, DHL handles more than 15 Lac shipments per day globally.E-Commerce to provide next boost for revenue growth
BDEL provides logistics services to E-Commerce providers such as prominent shopping and travel portals. Since logistics is a highly capital intensive business, these portals find it inefficient to set up their own network to ship goods to clients, thereby making use of existing, entrenched networks. This sector currently contributes only 9 percent of BDEL's consolidated revenues and hence there is further potential to ramp up volumes from the segment. Cash on Delivery (COD) is the preferred mode of payment for 55 percent - 60 percent of Indian shoppers who use e-commerce to shop. This is because Indians still do not trust online payment modes and the "payment only after delivery" has a culture affinity in India. Executing COD efficiently and painlessly for the customer is critical to the success of any e-commerce player in the country.Valuation: "BDEL is an acknowledged leader in the air express delivery segment in India, with a market share of 48 percent. With around 13 percent market share in ground express cargo segment, it looks to significantly expand in this segment in coming period. We expect BDEL's revenue and net profit to grow at CAGR of 23 percent and 26 percent respectively over FY13-16. We expect increasing share of high margin value-added business and operating leverage are likely to expand BDEL's EBITDA margins from 14.2 percent in FY13 to 15.3 percent by FY16. At the CMP of Rs 2,424, BDEL trades at P/E of 15x FY16E EPS of Rs 163. We attach an exit multiple of 20x to arrive at the target price of Rs 3,256. We initiate coverage on BDEL with a BUY rating and target price of Rs 3,256, implying an upside potential of 34 percent," says GEPL Capital research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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