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Blue Dart: Performance par excellence - Views on News from Equitymaster
 
 
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  • May 9, 2001

    Blue Dart: Performance par excellence

    India's truly multimodal express company, Blue Dart has continued its excellent performance. The company is a leader in domestic courier and cargo industry with a market share of 38%. While income from operations has increased 25%, net profit showed an excellent growth of more than 88%. Infact the net profit has grown at a CAGR of more than 75% in the last three years. Operating profit margins have shown an improvement of more than 300 basis points.

    (Rs m) FY00 FY01 % Change
    Sales 2,053 2,562 24.8%
    Other Income 2 5 170.0%
    Expenditure 1,789 2,152 20.3%
    Operating Profit (EBDIT) 264 410 55.3%
    Operating Profit Margin (%) 12.9% 16.0% 24.4%
    Interest 88 100 13.6%
    Depreciation 38 56 47.4%
    Profit before Tax 140 259 85.3%
    Extraordinary Income - - -
    Tax 17 28 64.7%
    Profit after Tax/(Loss) 123 231 88.1%
    Net profit margin (%) 6.0% 9.0%
    No. of Shares (eoy) (m) 11.9 11.9
    Diluted Earnings per share 10.3 19.4
    P/E (at current price) 22.3 11.9

    The express business of the company can be segregated into document and non-document areas. The document business is a high margin activity and currently accounts for 35% of the revenues, whereas the non-document activities contribute the balance. Thanks to the company's own aircrafts, variable costs are amongst the lowest in the industry. Any rise in volumes therefore generates higher profits for the company. Blue Dart's third aircraft has begun operations from January'01 and the growth story doesn't stop there. The company has already initiated planning for the acquisition of its fourth aircraft, which should start operations in a couple of years.

    Again, the domestic business is more lucrative for Blue Dart as in international operations the company has to operate on cost-plus basis. International business however, helps the company in leveraging the existing infrastructure. The domestic business of the company currently accounts for 80% of the revenues while the international operations accounts for the balance. The situation was exactly the opposite in 1995.

    Blue Dart has an exclusive tie-up with world leader FedEx. Under this agreement, Blue Dart is the exclusive provider of transportation, pickup and delivery, customs and related services for FedEx's international priority shipments, as well as the sole preferred consolidator of FedEx services. This agreement is supposed to be reviewed in 2002.

    Blue Dart does not face much competition as it offers dedicated air infrastructure coupled with countrywide surface network to compliment the airline services. Blue Dart's own aircraft infrastructure enables it to offer the 10.30 a.m. unique selling proposition, whereby the company assures delivery next morning (latest by 10:30 am).

    Share holding pattern
    Promoters 51.00%
    FIIís/Mutual Funds 9.50%
    New Field Holding Schroder 25.70%
    Free Float 13.80%

    The company is quite closely held. The promoters hold around 51% stake in the company and only around 14% is in free float. The company has declared a 1:1 bonus which should create the necessary liquidity in the stock.

    At the current market price of Rs 231, the stock is trading at 12 times its FY01 earnings. With additional infrastructure in place and expansion of operations to new routes the company is expected to maintain its growth pace in future.The flip side however, is any increase in aviation turbine fuel (ATF) prices would have negative impact on the company's financials. Further, one should keep in mind that its agreement with FedEx is due for review after 2002.

     

     

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