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Blue Dart: An overview - Views on News from Equitymaster
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Blue Dart: An overview
Aug 26, 2008

Brief background:
Blue Dart Express Limited (Blue Dart) is one of South Asia's largest courier and integrated air express companies, with a dedicated aviation infrastructure. It has the most extensive domestic network covering over 20,955 locations, and services more than 220 countries and territories worldwide through its sales alliance with DHL. It uses state-of-the-art technology, indigenously developed, for track and trace, MIS, ERP, customer service, space control and reservations. The company has e-commerce, B2B and B2C initiatives, which also includes partnership with some of the prime portals in the country. DHL acquired the major part of Blue Dart's shareholding in 2005, giving it leadership in the Indian market. DHL Express (Singapore) Pte Ltd. acquired 68.21% of equity share capital from the Indian promoters and 12.82% from the public in an "Open Offer" aggregating 81.03% of equity share capital of the company.

Let us see the financial performance of the company in the last five years i.e. between 2003 and 2007.

(Rs m) CY03 CY04 CY05 CY06 CY07 % growth (CAGR)
P&L            
Net sales 3,154 3,549 4,151 6,680 8,087 26.5%
Operating profit 447 552 740 997 1,279 30.1%
OPM (%) 14.2% 15.6% 17.8% 14.9% 15.8%  
Net profit 215 265 434 502 699 34.4%
NPM (%) 6.8% 7.5% 10.5% 7.5% 8.6%  
Balance sheet            
Total Equity 1,170 1,317 2,023 2,501 3,173  
Total Debt 515 653 420 102 -  
D/E (x) 0.4 0.5 0.2 0.0 0.0  
Working cap (excl. cash) 314 290 554 687 783  
% sales 9.9% 8.2% 13.3% 10.3% 9.7%  
NFA 1,138 1,477 1,797 1,705 1,636  
Sales/NFA (x) 2.8 2.4 2.3 3.9 4.9  
Ratios            
RONW 19.0% 21.3% 21.5% 20.1% 22.0%  
ROIC 14.6% 14.2% 14.4% 17.9% 27.1%  
Interest coverage 7 10 30 50 268  
P/E* (x) 8.6 10.5 25.1 26.3 21.5  
* Price is average of high and low during the year

Profit and loss account:

  • The company managed to grow its sales at a CAGR of 27% backed by robust growth in the economy of the country.

  • The operating profit margins of the company expanded from 14% in CY03 to 16% in CY07. The operating profits grew at a CAGR of 30% during the same period, higher than the topline growth. This was brought about by a consistent reduction in freight handling and servicing costs, one of the key cost components of the company.

  • The bottomline growth of the company came in at a higher rate than the topline and operating profit. It grew at a CAGR of 34%, as the company became debt free in CY06.

Balance sheet:

  • The company managed to reduce it debt to equity ratio from 0.4 in CY03 to nil in CY06 making it a debt free company.

  • The working capital (cash excluded) of the company grew at a CAGR of 26%. However if we consider it as a percent of sales it remained stable at 10%.

Cash flows:

  • The company invested around Rs 1.2 bn in capex between the period 2003 and 2007, all of which was funded with internal accruals

  • As far as investment in working capital is concerned, it has done well to reduce its working capital needs despite the steady growth in sales and this is indeed a good sign.

Future prospects: The company has a built a strong presence in the South Asian markets and has become a market leader in India. It should be noted that the express industry grows at a rate 2 to 3 times the GDP of the country and if we observe the growth of Blue dart during the last five years, it has actually managed to surpass expectations. So, taking into account India’s economic growth and the company’s historical performance, we feel that Blue dart, even on a conservative basis, should be able to grow at a CAGR of between 15% to 20% over the medium term.

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