Blue Dart's in-line Q4 results impress brokerages; analysts see up to 26% potential upside

Improved utilization of the newly added aircraft, along with network expansion, is likely to result in higher volumes for Blue Dart Express, said Motilal Oswal.

Shares of Blue Dart Express extended gains on May 6 as the company's in-line results for the quarter ended March 2024 left analysts impressed, prompting them to retain a 'buy' rating on the stock. The scrip was up 0.8 percent at Rs 7,228.75 on NSE at 9:34 am.

Both Nuvama and Motilal Oswal have retained a ‘buy’ on the stock.

Blue Dart is the market leader in India’s air express market with a 54 percent plus share and analysts believe that the company's structural turnaround story is intact and current transitory issues are on the brink of fading out.

Blue Dart's recovery is on track, according to Nuvama Institutional Equities, and it expects the logistics company's utilisation to improve over coming quarters. "Newly added aircraft shall lift air parcel volumes," the brokerage said.

Blue Dart Express on May 1 reported a consolidated net profit of Rs 77.78 crore for the March quarter, registering a 12 percent increase on the back of revenue growth. The company had reported a net profit of Rs 69.44 crore in the year-ago period.

The company posted shipment volume growth of 12 percent on-year in Q4FY24. E-commerce contributes 30 percent to total volumes, and Motilal Oswal expects it to be one of the biggest growth drivers for Blue Dart, given healthy and steady demand.

"Improved utilization of the newly added aircraft, along with network expansion, is likely to result in higher volumes for the company," the brokerage said.

With improved volumes, better realizations, and an increasing market share in the surface express segment, analysts at Motilal Oswal expect Blue Dart to register a CAGR of 17, 32 and 38 percent in revenue, EBITDA and PAT, respectively over FY24-26. The brokerage largely retained its estimates and maintained a 'buy' rating on the stock with a revised target price of Rs 7,860.

Nuvama also has a 'buy' call on the counter with a target price of Rs 8,462 per share, valuing the stock at 38x on FY26E. The recommendation is based on the Pandemic-induced boom in e-commerce aiding BDE, along with a restructured leaner employee cost structure.

The brokerage said that the earnings downgrade cycle seems to be behind, and BDE is clearly making inroads into e-commerce.

Analysts at Nuvama also noted that Blue Dart had invested in building its road express network during pre-covid years (FY17-19). During covid, investments in facilities and infra expansion were somewhat put on hold. However, the company restarted these investments in Q1FY24, and they shall "aid its volume growth trajectory," they said.

Additionally, the recent aircraft addition by Blue Dart is seen as a right move by analysts, as evident from 90mn-plus quarterly shipments the company is clocking. This coupled with double-digit growth in the

road segment implies BDE can potentially clock 10–12 percent revenue growth over FY24–26E, according to Nuvama analysts.

With Guwahati going live in January 2024, Blue Dart's management expects a further ramp-up in volumes, utilization, and profitability. Maintaining growth momentum with a premium-pricing model in a highly competitive B2B express market remains a tall ask, according to Emkay Global.

With H1FY25 expected to be muted for logistics players, owing to seasonality and pending central elections, the brokerage remains watchful around the sustainability of volume growth and margins for BDE.

It maintains a 'reduce' call on the stock with a target price of Rs 6,400 per share. It, however, marginally raised EBITDA estimates for FY25 and FY26 by 4 percent each, factoring in the beat in Q4FY24.

Also Read | Blue Dart Consolidated March 2024 Net Sales at Rs 1,322.87 crore, up 8.74% Y-o-Y

In the previous session, Blue Dart shares ended 7 percent higher at Rs 6,720.00 on the National Stock Exchange (NSE). So far this year, the stock has fallen over 8 percent, underperforming benchmark Nifty 50 which has risen nearly 4 percent during this period.