Sell Blue Dart; target of Rs 3795: Kotak Securities

Kotak Securities' report on Blue Dart Express

"Blue Dart Express (BDE) reported Q3FY15 PAT at Rs 271 mn below our expectation of Rs 375 million. Sales was reported at Rs 5.89 bn (flat QoQ and +16% YoY) on account of small improvement in volumes. Ebidta was weak at Rs 485 mn translating into margin of 8.2% (-50 bps QoQ). It is important to note that the company has completed the allocation of bonus debentures effective November 21st, 2014 and which has led to interest outflow of Rs 36 mn for the quarter."

"Earnings growth would be stable for the company at 18% CAGR over FY14 to FY16E amidst competition. The stock has increased by 20% in the last 6 months and now trades at a very stretched valuation of 94x FY16E EPS, more than its 3-yr average one year forward PE (x) multiple of 52x. We expect the company to enjoy premium valuations for its dominant market share, strong asset base, healthy growth rate, strong balance sheet and parentage of DHL. We value BDE at 52 times one year forward PE. We continue to recommend SELL with an increased TP of 3795 (earlier Rs 3210) for the stock", says Kotak Securities research report.

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