Oct 10, 2015 Industrials - Transportation & Logistics Blue Dart OctExpress 10, 2015 Ltd Blue Dart Express Ltd Bloomberg Code: BDE IN India Research - Stock Broking HOLD Premium Play on Indian Logistics with Domestic Cargo Jets Recommendation (Rs.) CMP (as on Oct 09, 2015) 7480 Revival in the economy and robust growth in the E-tailing to drive future Target Price 8299 growth of the company: Upside (%) 11 In the next two years, the revenue of the company is expected to grow at an Stock Information average rate of 22%. The company provides premium express services to the B2B Mkt Cap (Rs.mn/US$ mn) 177486 / 2742 customers through air and ground express services. Since 2012, India’s express 52-wk High/Low (Rs.) 7850 / 4800 delivery service is growing at CAGR of 15% and the momentum is expected to 3M Avg. daily volume (mn) 0.01 improve further going forward. E-tailing would be the key driving factor for the Beta (x) 1.01 further growth of the industry, growing at a CAGR of 35% to $20 Bn by 2020. The Sensex/Nifty 27079 / 8190 company is betting heavily on the E-commerce growth story by investing on setting O/S Shares(mn) 23.7 up hubs and E-fulfillment centers both in the major cities, Tier II and Tier III cities. Face Value (Rs.) 10.0 The E-commerce revenue contribution for the company has also grown significantly Shareholding Pattern (%) from just 9% in 2009 to 25% in 2015. Promoters 75.0 On the operational front, the company has been generating healthy growth in the FIIs 6.7 number of shipments and tonnage handling. It is also reporting strong cash flow from DIIs 6.0 operations, at Rs. 1535 Mn, growing at CAGR of ~13%. As a result, the company is Others 12.3 able to meet its working capital and capex requirements from the internal accruals. Stock Performance (%) Due to the asset light business model, the company is also delivering healthy 1M 3M 6M 12M returns with the RoCE of the company in FY15 was over 32% going forward, the RoCE is expected to improve to 42.5% in FY16E and further to 49.3% in FY17E. Absolute 6 22 5 42 Relative to Sensex 0 24 12 38 Valuation and Outlook Source: Bloomberg With expected average earnings growth for the next couple of years at 47% and Relative Performance* at PEG ratio of 1.34x, the market price appears to have factored-in most of these 150 strong positives of the company. At a current price of Rs. 7480, the stock is trading at a P/Ex of 63.9x on FY17E earnings and we thus assign “HOLD” rating for the 130 stock with a price target of Rs. 8299. 110 Key Risks 90 yy Economic slowdown. Oc t-14 Jan-15 Apr-15 Jul-15 Oc t-15 yyThird party risk is involved, as most of the assets of the company are on lease. Blue Dart Sensex Source: Bloomberg; *Index 100 Exhibit 1: Valuation Summary (Rs. Mn) YE Mar (Rs. Mn) FY13 * FY14 FY15 FY16E FY17E Net Sales 21717 19383 22722 27148 33880 EBITDA 2688 1741 2242 3206 4540 EBITDA Margin (%) 12.4 9.0 9.9 11.8 13.4 Adj. Net Profit 1933 1226 1293 1901 2778 EPS (Rs.) 81.5 51.7 54.5 80.1 117.1 RoE (%) 29.2 18.8 27.2 51.9 53.2 Analyst Contact PE (x) 91.8 144.8 137.2 93.4 63.9 Source: Company, Karvy Research, *FY13 figures are for 15months (Jan 2012 - Mar 2013) Ajay Lakra For private circulation only. For important information about Karvy’s rating system and other disclosures refer 040 - 3321 6271 to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>, [email protected] Thomson Publishers & Reuters 1 Oct 10, 2015 Blue Dart Express Ltd Company Financial Snapshot (Y/E Mar) Company Background Profit & Loss (Rs. Mn) Blue Dart Express is India’s premier courier and integrated FY15 FY16E FY17E express logistics company, providing Air and Ground express Net sales 22722 27148 33880 services to its diverse customers from all industry verticals in Optg. Exp (Adj for OI) 20479 23941 29340 over 34000 locations in India. Currently, the company operates with five aircrafts (B-757) covering seven stations and over EBITDA 2242 3206 4540 8100 express support vehicles. It has over 582 retail stores Depreciation 436 435 506 with a dedicated workforce of over 9969 blue darters. Being Interest 112 311 311 a part of DHL group, a premier global brand in the express Other Income 246 200 180 distribution services, it has access to the largest and most PBT 1941 2660 3902 comprehensive express and logistics network worldwide, Tax 669 798 1171 covering over 220 countries and territories. Its unique product Adj. PAT 1293 1901 2778 offerings for different services with integrated solution give Profit & Loss Ratios the company an edge over its peers and helped it to retain its EBITDA margin (%) 9.9 11.8 13.4 leadership position. The company enjoy ~52% market share in Net margin (%) 5.7 7.0 8.2 air express and ~14.5% market share in the ground express P/E (x) 137.2 93.4 63.9 (2013). It has two subsidiary companies, Concorde air logistics and Blue Dart Aviation, both engaged in supporting the overall EV/EBITDA (x) 79.9 55.9 39.0 business of the company. Dividend yield (%) 0.3 0.3 0.4 Source: Company, Karvy Research Balance sheet (Rs. Mn) Cash Flow (Rs. Mn) FY15 FY16E FY17E FY15 FY16E FY17E Total Assets 9881 10866 13504 PBT 1941 2660 3902 Net Fixed assets 1705 1951 2175 Depreciation 436 435 506 Current assets 5370 5549 7937 Interest 112 311 311 Other assets 2806 3367 3393 Tax (755) (814) (1194) Total Liabilities 9881 10866 13504 Changes in WC (113) (408) 243 Networth 3073 4258 6179 Others (87) (129) (96) Debt 3322 3322 3322 CF from Operations 1535 2055 3673 Current Liabilities 3237 3013 3696 Capex (598) (600) (650) Other Liabilities & provisions 250 273 308 Others 917 (390) 120 CF from Investing 319 (990) (530) Balance Sheet Ratios Change in Debt 3322 0 0 RoE (%) 27.2 51.9 53.2 Dividends (4465) (715) (858) RoCE (%) 32.0 42.5 49.3 Interest (112) (311) (311) Net Debt/Equity 0.1 0.4 0.1 CF from Financing (1255) (1026) (1169) Equity/Total Assets 13.4 18.3 22.8 Change in Cash 598 39 1974 P/BV (x) 57.8 41.7 28.7 Source: Company, Karvy Research Source: Company, Karvy Research Exhibit 2: Shareholding Pattern (%) Exhibit 3: Revenue Segmentation (%) FIIs 6.7% Ground Express 20% DIIs Promoters 6.0% 75.0% Others 12.3% Air Express 80% Source: BSE, Karvy Research Source: Company, Karvy Research 2 Oct 10, 2015 Blue Dart Express Ltd Leadership position in India’s express logistics services with robust infrastructure facilities across the country Company holds largest market share in India’s Air Express The company enjoys leadership position in India’s air express industry with a market share of ~52%. It is the only company in India to operate domestic cargo jets, making it the preferred choice in comparison to its rivals who have to rely on the cargo space of any commercial carriers. It has two subsidiary companies, Concorde Air Logistics and Blue Dart Aviation, which dedicatedly involve in servicing the air express business of Blue Dart Express. Exhibit 4: Leadership Position in Air Express Market Blue Dart Aviation: The company has 5 aircrafts (B-757), offering a payload of over 385 tonnes per night across 60 routes. It is further planning to add Others Competitor 3 13.6% one more aircraft which will increase the company air cargo handling 8.5% capacity. The company takes all these aircraft on lease; this makes the company asset light and thus higher RoCE. The company has been Competitor 2 Blue Dart consistently posting excellent technical dispatch reliability and in FY15, 10.9% 52.0% it stood at 99.63%. Blue Dart Express has recently acquired additional 25% stake, for Rs. 540 mn, in Blue Dart Aviation and increased its holding Competitor 1 15.0% to 74%. Blue Dart Express is the only customer to whom the company provides exclusive services through its operation of night operations. Source: Company, Karvy Research Concorde Air Logistics: It is a wholly owned subsidiary of Blue Dart Express, delicately engaged in the services of clearing, forwarding of time sensitive cargo packages. Concorde Air Logistics is a registered air cargo agent with the International Air Transport Association (IATA) and licensed Custom House Agent (CHA) under the provisions of Customs Act, 1962. It also has Break-bulk license to handle consolidated shipments. All these keep the company ahead of any of its peers, as it facilitates its customers with the quick clearance of the shipment from the customs. Gaining Market Share in the Ground Express Exhibit 5: 15% In the last couple of years, the company has gradually increasing its 14.5% market share from 5.9% in 2006 to 14.5% in 2013. Meanwhile, the revenue 10% contribution from the ground express has also grown for the company and is contributing 20% and the balance 80% is from air express. The 5% company follows hub-and-spoke model to provide seamless services to 5.9% its customers. It has over 79 express hubs and 582 retail outlets, including the retail outlets of DHL express, helping its committed 9969 blue darters 0% 2006 2013 giving quality services.