Buy Blue Dart Express Ltd For Target Rs.8,100 by Motilal Oswal Financial Services Ltd
In-line performance; focus on expanding surface infrastructure
* Blue Dart Express (BDE)’s revenue grew 9% YoY to INR15.1b, in line with our estimate. The company handled 0.34m tons of cargo volumes (+12% YoY) in 3QFY25. The realization dipped 2% YoY to INR42.1/kg. It carried 96.6m shipments in 3Q.
* EBITDA margin stood at 9.7% vs. our estimate of 9.4%. The margins remained flattish YoY but saw a 130bp improvement QoQ.
* PAT declined 3% YoY to INR791m (against our estimates of INR763m). ? During 9MFY25, revenue was INR43b (+9% YoY), EBITDA was INR3.8b (flat YoY), EBITDA margin came in at 8.8%, and APAT was INR1.9b (-10% YoY).
* During the quarter, surface volumes grew at a faster rate than air volumes. For FY25, surface express is expected to grow in double digits, while air express is expected to report growth of ~5% in FY25.
* EBITDA margin has started to expand as capacity utilization has reached its optimum levels, and BDE has shifted some volumes from third-party cargo to its own aircraft. Additionally, BDE continues to expand in the surface express segment.
* BDE’s 3Q saw margin expansion as capacity utilization of the new aircraft began to improve, and the company benefitted from the festive season surcharge. We retain our estimates for FY26 and FY27 and reiterate our BUY rating with a revised TP of INR8,100 (based on 20x Sep’26E EV/EBITDA). With high capacity in place and utilization expected to pick up, we believe BDE is well-placed to capitalize on the growth opportunity ahead.
BDE operating at optimum utilization levels; B2C segments growing strongly
* BDE saw a 12% YoY increase in tonnage. The company focuses on improving EBITDA margins through better fleet utilization and price hikes.
* Surface express has outpaced air express, and the company continues to strengthen its position in the e-commerce market, particularly in B2C shipments.
* B2C shipments showed strong growth (16.6% QoQ), and BDE aims to further increase its market share in this segment.
Highlights from the management commentary
* The company has achieved optimal capacity utilization and has mechanisms in place to address fluctuations in ATF prices.
* The key drivers of EBITDA margin expansion during 3Q were higher demand during the festive season, improved fleet utilization, festive season surcharge, and effective cost management.
* A price hike was announced in Jan’25, and its actual impact will become evident in the next quarter's results.
* Capex for CY24 stood at INR 622m, significantly lower than the budgeted INR13b. This reduction was influenced by both internal and external factors, including market demand. The company will soon release its CY25 budget, which will provide further details on growth and capex plans.
Valuation and view
* The recent increase in volumes, driven by the enhanced utilization of newly added aircraft, the growth on newly introduced routes, and ongoing network expansion, is expected to further boost BDE's performance and volumes.
* Given the increasing market share of BDE in the surface express segment, along with network expansion, we expect the company to post a CAGR of ~15%/ 26%/29% in revenue/EBITDA/PAT over FY24-27. We reiterate our BUY rating with a revised TP of INR8,100 (based on 20x Sep’26E EV/EBITDA).
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