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Blue Dart: The Freight fright - Views on News from Equitymaster
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Blue Dart: The Freight fright
Nov 6, 2008

Performance summary
  • Standalone topline of the company grows by 28% YoY despite slow down concerns

  • Operating profits decline by 21% YoY causing a fall in EBITDA margins by 560 bps to 9% mainly on account of higher freight handling and servicing costs (as percentage of sales).

  • Decline in operating profits caused bottomline to drop by 22% YoY during the quarter.

  • For the 9 months ended Sept 30, 2008, the company’s bottomline has reported a 28% jump on the back of 30% YoY growth in topline



Standalone results

(Rs m) 3QCY07 3QCY08 Change 9mCY07 9mCY08 Change
Net sales 2,073 2,658 28.2% 5,764 7,501 30.1%
Expenditure 1,771 2,419 36.6% 4,826 6,430 33.2%
Operating profit (EBDITA) 302 239 -20.8% 938 1,071 14.2%
EBDITA margin (%) 14.6% 9.0%   16.3% 14.3%  
Other income 9 6 -38.9% 21 25 16.7%
Interest (net) 1 (6)   3 (6)  
Depreciation 44 42 -4.3% 179 122 -31.8%
Profit before tax 266 209 -21.6% 777 980 26.1%
Extraordinary income/(expense)            
Tax 92 73 -21.0% 268 330 23.0%
Profit after tax/(loss) 174 136 -22.0% 509 650 27.7%
Net profit margin (%) 8.4% 5.1%   8.8% 8.7%  
No. of shares (m) 23.7 23.7   23.7 23.7  
Diluted earnings per share (Rs)*         34.7  
Price to earnings ratio (x)*         13.2  
(* on trailing twelve months earnings)

What has driven performance in 3QCY08?
  • The consistent performance in topline has continued with the company having registered 28% YoY growth during the third quarter. This impressive performance has come about on the back of the company’s ability to establish an unrivalled position in the domestic express industry (door-to-door transportation of next day or time definite shipments). It is perhaps the only logistics company in India that does not depend on any passenger airlines for carriage of its packages and instead has a full-fledged aviation system consisting of 7 fully owned aircrafts, a huge competitive advantage to have in the express industry.

    Cost break-up...

    (Rs m) 3QCY07 3QCY08 Change
    Freight Handling & other expenses 1,277 1,781 39.5%
    % sales 61.6% 67.0%
    Staff cost 329 428 30.1%
    % sales 15.9% 16.1%
    Other expenditure 165 210 27.1%
    % sales 8.0% 7.9%

  • On the operating front, operating profits showed a decline of 21% YoY causing the EBITDA margins to shrink by 560 bps. This was mainly on account of higher freight handling and servicing costs caused due to increased ATF prices during the quarter.

  • The bottomline growth showed a decline of 22% YoY, nearly in line with the decline in operating profits, on the back of benign depreciation and interest charges. The company’s nine month performance has however been impressive, as the bottomline has grown 28% YoY on the back of a 30% topline growth

What to expect?
At the current price of Rs 460, the stock is trading at a multiple of 8.2 times its expected CY10 earnings. The company’s bottomline growth for the nine-month period has come in slightly lower than our expectations. However, we do not feel the need to revise our estimates. Furthermore, we have already been conservative with respect to our assumptions over the next couple of years. With the stock having fallen significantly below our recommended price, we change our view to Buy from Hold. The stock is looking attractive at current levels from a CY10 perspective.

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