Gladiator Stocks - Blue Dart Express: ICICI Direct
According to ICICI Direct, The stock has registered a resolute breakout above the bullish rounding formation of the last seven months signalling a reversal of the corrective trend and resumption of fresh up move thus offers fresh entry opportunity.
September 30, 2020 / 04:20 PM IST
ICICI Direct's research report on Blue Dart Express
Buy Blue Dart Express in the range of Rs 3100.00–3220.00 for target price of Rs 3710.00 with a stop loss of Rs 2850.00. Time Frame: Six months
The stock has registered a resolute breakout above the bullish rounding formation of the last seven months signalling a reversal of the corrective trend and resumption of fresh up move thus offers fresh entry opportunity. The base of the rounding formation is placed at the 80% retracement of the previous major rally of CY09-15 (Rs 390 to Rs 7850). During the current month, the stock witnessed highest monthly volume since April 2011 highlighting accumulation at the major support area. Structurally, the stock has retraced its 24 weeks decline Rs 3071 to Rs 1873 in just seven weeks. A faster retracement in less than half the time interval signals strength and a structural turnaround. We expect the stock to continue its positive momentum and head towards Rs 3710 levels in coming months as it is the confluence of the high of March 2019 and the 61.8% retracement of CY18-20 decline (Rs 4824-1873) placed around Rs 3710.
Blue Dart Express is a premium express logistics company with a pan-India reach of ~14400 pin codes (against total of 19500 pin codes), covering 35000 locations. Global logistics market leader DHL is the parent of Blue Dart and regards the Indian subsidiary as part of its core strategy to capture the fast growing Indian express logistics market. DHL also helps Blue Dart to fulfill international deliveries from over 220 countries. Blue Dart maintains 45% share in the air express distribution, which contributes ~78% to its consolidated revenues. The rest 22% is contributed by the surface express business. Also, B2B forms 81-82% of revenues while B2C contributes 18-19%. Blue Dart’s cargo aircraft flew across domestic and international locations in Q1 to carry essential supplies (supported by DGCA and Government of India). Also, owing to continued challenges being faced by the surface and shipping players in timely delivery of the cargo, air cargo is expected to be a beneficiary of the situation in the near to medium term, as the industry. normalises and manufacturers rush to transport shipments. For Blue Dart, improved product mix (2x realisation to surface) can lower the impact of the slashing of courier prices by the company across segments (the measure is expected to be temporary in nature). While operations are expected to normalise by H2, we expect tonnage growth to return in FY22. Blue Dart is expected to tide over the current crisis by continued automation, enhancing technological capabilities and enhance service capabilities. New client acquisitions and a focus on reducing costs is expected to keep the company on a profitable growth trajectory. On the EBITDA margin front, we largely expect it to stay range bound at 15% in FY22. Blue Dart will remain on its road to recovery in the near to medium term.
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