ICICI Direct's research report on BlueDart Express
BlueDart reported its Q4FY20 results, which reflected the changing business environment. Consolidated revenues fell 7% YoY to Rs 726 crore (mainly due to the weak business sentiments from mid-March onwards). Further, while utilisation remained weak in April (only essential supplies via air freight), May has started showing certain green shoots for the economy per se. EBITDA margins (adjusted for Ind-AS 116 effect) declined 210 bps to 5.5%, in spite of the cost optimisation and employee rationalisation steps taken by the management in Q3FY20 (impact negated by the weak operating leverage). Further, higher depreciation expense led to a loss at the PAT level.
Covid-19 has hastened the expected consolidation of BlueDart’s competitors (PE funded players) in the B2C and B2B segment, as they are seeing greater stress in cashflow management, inflated labour cost and other expenses. This can deter them from dealing in unprofitable business sales, lowering competitive intensity in the segment. BlueDart being an already profitable player in the space, remains a key beneficiary of such changing dynamics in the sector, which helps it to gain its lost market share. Hence, we maintain our BUY rating on the stock with a revised target price of Rs 2250/share.
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