Goldman Sachs remained bearish on Blue Dart Express and maintained sell rating after weak set of earnings for the quarter ended June 2017. The stock price fell more than 2 percent intraday Friday.
The research house slashed its 12-month target price to Rs 4,160 (from Rs 4,500) after lowering FY17/18/19 EPS estimates by 27/13/6 percent on pricing pressure.
With continued pressure on pricing and the industry adjusting to prepare for GST, it expects near term profitability of the company to remain muted.
Blue Dart reported weak Q1FY18 earnings across parameters. Revenue growth remained subdued at 7 percent YoY (sixth straight quarter of less than 10 percent growth) at Rs 666.6 crore, which partially impacted by lower transportation activity in the June prior to the GST rollout.
EBITDA margin declined by 553 basis points YoY as the company was unable to recover the higher fixed costs (70 percent is fixed) due to weak volume growth and limited room to increase pricing due to higher competition. Further, higher fuel costs (Brent oil Q1FY18: USD 51 a barrel versus USD 47 in Q1FY17) also impacted margins.
A decline in margins resulted in consolidated profit declining by 52 percent YoY to Rs 21.1 crore in June quarter.
Goldman Sachs feels Blue Dart remains the market leader in air express logistics and should benefit from expected express logistic market growth over the long term.
However, more competition from in-house e-commerce logistic companies (as they expand their reach and start serving third party e-commerce) and specialist e-commerce logistics companies could result in the company compromising on either volumes or margins, according to the research house.
At 10:25 hours IST, the stock price was quoting at Rs 4,302.00, down Rs 52.10, or 1.20 percent on the BSE.
Posted by Sunil Shankar Matkar
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