Small & Midcap Mantra | Blue Dart rallies nearly 200% in 1 year but still an attractive buy, here’s why  

The stock has witnessed a faster pace of retracement as it retraced the decline of the last 15 quarters (Rs 5,620-1,822) in just four quarters, highlighting structural improvement that augurs well for the next leg of up move.

June 11, 2021 / 03:09 PM IST
 
 
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Blue Dart Express Ltd has been on the buyers' list in 2021. The stock has rallied nearly 50 percent this year, compared to a 12 percent rally in the Nifty50. On a one–year basis, Blue Dart has risen nearly 200 percent agiant an over 50 percent gains in the Nifty.

Blue Dart hit a fresh 52-week high of Rs 6,184 on the BSE on May 27, 2021 and has since been trading in a range but technical experts see the stock closing in on Rs 7,000 in the coming months.

BlueDart is a premium logistics player with an air:surface ratio (revenue share) of 75:25 and B2B: B2C of 78:22. Segments such as e-commerce, pharmaceuticals, consumer electronics, etc, played a crucial role in the healthy uptick in revenue since Q1FY20, experts say.

“There are many stocks in the logistics sector where most quality stocks have undergone significant price/time correction that are available at favourable risk-reward proposition,” Dharmesh Shah, Head–Technical, ICICI Direct, said.

“We have selected companies, which fit this criterion and offer a favourable risk-reward setup at the current juncture. While some prominent names have already bounced back to their lifetime highs, we expect other stocks to catch up from here on,” he said.

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Technically, the stock has witnessed a faster pace of retracement as it completely retraced the decline of the last 15 quarters (Rs 5,620-1,822) in just four quarters, highlighting structural improvement that augurs well for the next leg of up move

“We expect the stock to sustain above its 50 days EMA, which has been held since August 2020 and gradually head towards Rs 6,975 in the coming months, as it is price parity of Feb-April move (3,820-5,845) projected from April low of 4,952,” says Shah.

The stock has managed to hold above the upward sloping support trend line (adjoining lows of 1,873-3,820), highlighting elevated buying demand that signifies inherent strength.

Fundamental View

Elara Capital maintains a “buy” rating on Blue Dart with a target price of Rs 6,226, the brokerage house said in report in May.

The company reported a consolidated net profit of Rs 90 crore for the fourth quarter ended March 2021 against a net loss of Rs 30.57 crore in the year-ago period.

The company reduced standalone gross debt by Rs 525 million to Rs 225 million and the consolidated balance sheet also turned net cash, led by a healthy free cash flow generation which is a positive sign for the company.

With cash and current investments of Rs 4.6 billion, the management could explore further debt reduction, or aircraft purchase or some value accretive investments, the Elara Capital report said.

“We expect volume to grow in the high single digits, led by growth in GDP, new customer additions, omni-channel tie-ups, e-commerce growth, and value-added services. We expect standalone EBITDA margin to sustain in the range of 12-14 percent over FY22-23E,” it said.

Elara raised the earnings by 18 percent for FY23E, reiterating “buy” with a higher target price of Rs 6,226 from Rs 5,565 on 25x (unchanged) EV/EBITDA FY23E.

Disclaimer: The views and investment tips expressed by investment experts 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.
Kshitij Anand is the Editor Markets at Moneycontrol.

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