Bluedart Express Ltd - Q2FY21 Result Update - YES Securities

HIGHLIGHTS

- Bluedart Express (BDE) revenues grew by 8% YoY and doubled QoQ to Rs 8.7 bn driven by sharp improvement in realization which more than offset the marginal volume decline. BDE significantly benefited from opening-up of Economy and jump in Ecommerce business.

- During the quarter, volumes were driven by higher share of packages while document shipments were lower. The share of documents stood at 22% (average of 28-30%). Many offices remained closed or were working at minimal operational due to lockdown. Further documents regarding exams got postponed impacting the business. BDE expects improvement in coming quarters as exams restart.

- Part of the sharp improvement in margin performance is due to pent-up demand and would marginally correct in next couple of quarters.

- Previously, BDE provided ~25% discount on shipments related to medical equipment and expects to give ~50% discount during Diwali to walk-in customers (small contribution to volumes). BDE had levied Emergency Situations Surcharge on certain shipments to offset low capacity utilization which will get over by December and will be replaced through general price increase (GPI) from January 2021.

- During the quarter, the Company paid one-time ex-gratia to its employees. This led to a one-time cost of Rs.342 mn.

- Capex for 1H FY21 stood at Rs 355 mn vs Rs 1.99 bn in FY20. Surface cargo is currently ~30% of the volumes. BDE expects both surface and air express to perform well in coming quarters and FY22.

- While Company is targeting for a 10% price increase from January 2021, it is confident of a blended price hike of ~5% as some customers may not be able to absorb the entire hike.

Our View

- The Company has witnessed significant recovery (much faster than expected) and has been able to charge heavy premium in certain segments which may continue in coming quarters.

- We believe its Air and Surface cargo segments would continue to perform well with businesses opening (leading to increased logistics activity). It would continue to enjoy premium pricing in select sectors/segments leading to high profitability.

Valuation

- We have revised our estimates to incorporate the strong margin performance and significantly improved outlook. We upgrade the stock from SELL to REDUCE with revised target of Rs.3,500 (12x FY22 EV/EBITDA vs 8x earlier).

Risk to our call: Second COVID wave leading to lockdown and impacting shipments.

Shares of BLUE DART EXPRESS LTD. was last trading in BSE at Rs.3700.55 as compared to the previous close of Rs. 3244.95. The total number of shares traded during the day was 24454 in over 5689 trades.

The stock hit an intraday high of Rs. 3784 and intraday low of 3356. The net turnover during the day was Rs. 89580392.

Source : Equity Bulls

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