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Confident of revenue and margin tidings 

Bluedart Express (BDE) underlined positive tiding for volumes as well as margins. Management is witnessing strong demand environment with comfortable double digit growth in road express and high single digit growth in air express. Relentless focus on customer satisfaction and efficient service delivery is allowing BDE to comfortably pass on the inflation in the system. Management is not too concerned from resurgence of belly cargo and is seeing a resurgence of B2C volumes aided by D2C and social commerce. Impact of price hikes undertaken on 1st Jan’22 will be witnessed in Q1FY23. We maintain SELL.

Transition to road express underway.

Demand environment continues to be strong. Management expects double-digit revenue growth in road express (road express is growing much faster than air express) and possibly high single digit growth in air express. Road express as a segment is almost similar to B2C segment now (~25% of top line). Management also highlighted that with the receding pandemic, the increasing road share will become more and more apparent. This makes management optimistic on revenue and margin possibility.

D2C revenue picking up in ecommerce.

Management highlighted that there is no cutoff for B2C revenue pie to grow as long as margins are palatable. Lot of enquiries and onboarding of customers are underway in the D2C space. Exclusive tie-ups in the public domain include Apple, Ikea, Nykaa etc. Pricing is determined by the kind of SoP each contracts desire. Potential growth in B2C driven by D2C and social ecommerce will be leveraged. Management is looking for shared network advantages between B2B and B2C as volumes ramp up.

Management expects margin to stay here if not grow, doesn’t look at return of belly cargo as a threat.

With realisation improvement (~10% of price hike undertaken from 1 st Jan’22 barring the customers onboarded in Q3FY22; full impact of price hike will be visible form Q1FY23) and with cost measures in place, BDE is hopeful that the margins will be maintained if not grow. All product portfolios are profitable at present and the profitability is growing, as BDE tries to improve on customer satisfaction—TAT performance as per management is 97-98 as against mid 80s for competition which is allowing a premium pricing for BDE. Management doesn’t look at bellycargo as a threat and highlighted that, in the pandemic, bellycargo capacity never went down as carriers were running special freight planes to cater to the cargo.

Other key highlights.

Higher marketing spend led to increased other expenses. Higher fuel prices and increased B2C mix impacted gross margins in Q3FY22. The purchase of an aircraft in CY21 leads to higher (accounting) other income with difference in value of RoU asset and purchase consideration coming in other income. Management expects to pursue an asset light model thereby limiting capex and assuming increasing facilities on rent.

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