Buy Blue Dart; target of Rs 6000: ICICI Direct

Blue Dart’s (BDE) results were lower than our expectation across all parameters. Revenue growth remained sluggish for a second consecutive quarter with growth of 1.6% YoY (up 6.7% QoQ) to Rs 663 crore (I-direct estimate: Rs 666 crore). Contribution from B2C sequentially grew 200 bps QoQ (down 400 bps YoY) to 22%. Growth in B2B business remains sluggish Addition of new aircraft continues to impact EBITDA margins, which de-grew 286 bps YoY (down 113 bps QoQ) to 11.3% (I-direct estimate: 12.5%). Subsequently, operating profits de-grew 19% YoY (down 3% QoQ) to Rs 74.8 crore (I-direct estimate: Rs 74.8 crore) A softer operating performance coupled with higher depreciation due to addition of aircraft, dented PAT. This was partly offset by lower taxation during the quarter. PAT de-grew 21% YoY (down 3% QoQ) to Rs 42.8 crore (I-direct estimate: Rs 47.7 crore). 

Subsequent to the muted growth of 1% in H1FY17, we taper our earlier growth estimates over FY16-18E. With the economy set to gather steam, BDE coupled with a strong balance sheet and close to debt-free capital structure is well equipped to ride out the next growth cycle triggered by GST implementation. Also, as the economy improves, given its strong client base, BDE’s business model provides earnings visibility. We believe growth will accrue gradually over a time frame and, hence, continue to value BDE on a DCF model to arrive at a target price of Rs 6000 with a BUY recommendation.  For all recommendations, click hereDisclaimer: 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.