Add Blue Dart Express Limited For Target Rs. 5,450 By Emkay Global Financial Services Ltd
Blue Dart Express (BDE)'s Q4FY26 print was weak. Consolidated EBITDA missed street/our estimates by 9%/12%, respectively. The management cited a change in product mix (toward heavier ground parcels), elevated vehicle hiring costs, and step-up in investments in sales and quality functions as reasons for muted margin performance. In line with the management’s commentary, we expect the surface express segment to remain the key growth driver for the company, as we expect growth in the air segment to be muted. However, higher contribution from the surface express business could weigh on the margin trajectory, as mix toward dense load increases. We, thus, expect EBITDA margin to be flat over FY26-28E, while baking in 10% revenue CAGR over the same period. Factoring in the Q4 miss and baking in higher capex investments (maintenance capex in air and network expansion in surface), we cut FY27E/FY28E PAT by 11%/7% and trim our Mar-27E TP by ~5% to Rs5,450 from Rs5,750 (DCF methodology), implying FY28E EV/EBITDA of 11x and P/E of 35x (LTA: 16x EV/EBITDA, 45x PER); maintain ADD.
Weak margin led by product mix shift toward heavier shipments
BDE’s consolidated revenue grew 8% YoY to Rs15.3bn. Volumes/shipments for the quarter stood at 360k/96mn metric tons, growing 9%/5% YoY, respectively, supported by sustained momentum across e-commerce and B2B Surface Express. Blended realization per kg was flat YoY, as the surface segment witnessed growth in shipments compared to that for air. Air/surface revenue mix for the quarter stood at 60%/40%. Gross margin narrowed by 44bps YoY to 41.0%, while EBITDA margin narrowed by 56bps to 14.5%, on the back of shift in product mix (toward surface), higher vehicle hiring costs, and investment in sales and quality functions. Decline in margins, coupled with an increase in finance costs (partly offset by the decline in tax expenses), led to an 11% YoY decline in adj PAT to Rs490mn. Net cash as on FY26 stood at Rs632mn.
Earnings call KTAs
1) Q4 saw volume tonnage growth of 9%, while shipments grew 5%. Current mix of air/surface stands at 60%/40%, while B2C/B2B mix at 30%/70%, respectively. 2) Post the rate hike in Jan-26, the management guided for blended realization improvement of ~3-4%, with full absorption expected through H1FY27 as customer renegotiations conclude. 3) Despite ATF prices rising in Mar-26, the management remained confident about limited impact on margins owing to the company’s fuel and currency surcharge mechanism which passes through any volatility in ATF pricing (as long as it mirrors Brent prices). 4) Two-thirds of air volumes move on BDE’s own aircraft; one-third on commercial airlines. Currently, BDE is operating at 85% volumetric utilization (pallet level), with >90–95% on main sectors (positioning flights pull down the average). 5) FY26 capex was Rs3.6bn, with Rs2bn incurred for aircraft maintenance and ~Rs1.2-1.5bn for surface, IT, and network expansion. The management guided for FY27 capex spend of Rs2.5-3bn, on the back of recurring Rs2bn aircraft maintenance capex.
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