IGI Logo

Strong quarter; margin sustainability a key monitorable

BDE reported a strong quarter as consolidated sales grew 9% YoY and EBITDA margins expanded 70bps YoY, on the back of higher utilization of new aircrafts and general price increase undertaken in Q4. With Guwahati going live in Jan24, the management expects further ramp-up in volumes, utilization, and profitability. Maintaining growth momentum with a premium-pricing model in a highly competitive B2B express market remains a tall ask, in our view. With H1FY25 expected to be muted for logistics players, owing to seasonality and pending central elections, we remain watchful around sustainability of volume growth and margins for BDE. We marginally raise our EBITDA estimates for FY25/26E by 4% each, factoring-in the beat; we maintain our REDUCE rating. Our Mar-25E TP stands at Rs6,400/sh (using DCF methodology), implying FY26E EV/EBITDA of 14x and P/E of 35x.

Margins buoyed by higher utilization, drive beat

BDE reported revenue growth of 9% YoY on the back of volumes growing in the ecommerce and documents business. Volume growth was reported at 9% YoY, while blended realizations (per kg) were flat on a YoY basis. Gross margins expanded 93bps YoY, due to substitution of load sent via belly cargo space with owned freighters. EBITDA margins followed suit, expanding 70bps YoY to 17.1% as employee costs were under control at 8% YoY. Other income increased by 28% YoY, negating the rise in depreciation (17% YoY). PAT reported a growth of 12% YoY, driven by strong operating performance. Company announced a dividend of Rs25/share. Capex incurred in FY24 stands at Rs2.67bn and is expected to continue at similar levels with major investments in augmenting surface network.

Outlook and risks

With growth returning in Q4, resulting in margin expansion owing to higher utilization of new freighters, we remain watchful around sustainability of the same, especially during H1FY25 — which will see seasonality and pending central elections in India. We believe the strong uptick in the documents business and DART plus product should bode well for the margins going forward. With Guwahati going live in Jan-24, utilization of air capacity could augment further, in our view. Modelling this, we raise our EBITDA for FY25/26E by 4%. Our sales/PAT estimates remain largely unchanged, as we expect volumes at 9% CAGR over FY24-26 period, while change in operating profits are to be largely offset by higher depreciation on account of new freighters. We anticipate muted realizations (-1% CAGR), as growth in surface outpaces the air segment. We await visibility on ramp-up in utilizations on new freighters with high-yield express volumes, as well as the marketshare protection in surface express to turn positive for BDE. Key risks: Higher demand for air and lesser substitution with other modes, premium pricing differential to expand due to brand and superior execution, change in pricing strategy in surface express, and rationalization of overhead costs.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354