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Blue Dart : Margins spoils the show
Jan 29, 2009

Performance summary
  • Standalone topline declines by 1.3% YoY during the quarter on account of slowdown in the economy.
  • Operating profits declines by 32.3% YoY , resulting in a 4.6% decline in EBITDA margins
  • Net profits decline by 34.5% YoY on account of lower operating margins and other income.
  • For full year CY08, bottomline grows by 10.6% YoY on the back of 21% YoY growth in topline.


Standalone financial snapshot
(Rs m) 4QCY07 4QCY08 Change CY07 CY08 Change
Net sales 2,323 2,293 -1.3% 8,093 9,794 21.0%
Expenditure 1,982 2,062 4.0% 6,808 8,494 24.8%
Operating profit (EBDITA) 341 231 -32.3% 1,284 1,301 1.3%
EBDITA margin (%) 14.7% 10.1%   15.9% 13.3%  
Other income 10 7 -27.1% 26 31 21.5%
Interest (net) 0 (15)   4 (21)  
Depreciation 62 44 -29.2% 240 166 -31.0%
Profit before tax 288 209 -27.6% 1,066 1,188 11.4%
Tax 99 85 -14.3% 366 414 13.0%
Profit after tax/(loss) 189 124 -34.5% 699 774 10.6%
Net profit margin (%) 8.2% 5.4%   8.6% 7.9%  
No. of shares (m) 23.7 23.7   23.7 23.7  
Diluted earnings per share (Rs)*         32.6  
Price to earnings ratio (x)**         12.9  
(* annualised, ** on trailing twelve months earnings)

What has driven performance in 4QCY08?
  • The topline of the company declined by 1.3% YoY on account of slowdown in the economy which resulted in deceleration of volumes growth during the quarter. The company business is heavily depended upon the performance of economy as it operates in the logistic industry.

  • The operating margins contracted by 460 bps to 10.1% during the quarter. This was mainly on account of fixed costs based business model of the company, where the company has to incur bulk of the expenses, whether volumes accrue to it or not. Thus, decelerating volumes growth impacted the margins adversely. The overall operating expenses increased by around 4% YoY during the quarter.

    Cost break-up…
    (Rs m) 4QCY07 4QCY08 Change CY07 CY08 Change
    Freight handling & other expenses 1,435 1,527 6.4% 5,019 6,359 26.7%
    % sales 61.8% 66.6%   62.0% 64.9%  
    Staff cost 351 303 -13.6% 1,164 1,327 14.0%
    % sales 15.1% 13.2%   14.4% 13.5%  
    Other expenditure 197 232 17.9% 625 808 29.2%
    % sales 8.5% 10.1%   7.7% 8.2%  

  • The bottomline declined by 34.5% YoY, despite the fact that depreciation and tax charges have fallen substantially. This was mainly on account of lower operating margins and fall in other income.

What to expect?
At the current price of Rs 420, the stock is trading at a multiple of 7.5x its expected CY10 earnings. The company’s topline growth for the full period CY08 has come nearly in line with our expectations. However, the bottomline has come lower than our estimates, mainly on account of greater than expected fall in margins. If we expect the current margin trend to continue, our target price will suffer a fall of around 11%. However, we would like to wait out for a couple of quarters more before we revise our margin assumptions.

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