E-commerce Expansion With Dart Plus Will Drive Future Logistics Performance

Key Takeaways

• Investment in infrastructure and capacity, coupled with Dart Plus, is likely to boost B2B and B2C growth and profitability over time.
  
• Effective price hikes and optimal fleet utilization could enhance operational efficiency, net margins, and overall profitability.
  
• Inefficient asset utilization, competition, and temporary EBITDA margin improvements may hinder Blue Dart Express's future revenue growth and profitability.

Catalysts

Provides courier and express services in India.

• Investment in new infrastructure and capacity expansion, including a recently commenced hub, may bolster growth in the B2B and B2C segments, likely leading to increased revenue over time.
  
• A focus on ground growth, particularly in the e-commerce segment with Dart Plus, could drive higher volumes and revenue growth, while also maintaining profitability.
  
• Price hikes ranging from 9% to 12% are expected to be absorbed effectively, potentially enhancing revenue and net margins in upcoming quarters.
  
• The company has reached optimal fleet utilization levels, which may improve operational efficiency and contribute to better net margins and earnings.
  
• The anticipated benefits from ATF price corrections are expected to slightly improve margins, thereby positively impacting profitability.

Blue Dart Express Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Blue Dart Express's revenue will grow by 9.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.9% today to 7.6% in 3 years time.
• Analysts expect earnings to reach ₹5.6 billion (and earnings per share of ₹236.78) by about April 2028, up from ₹2.8 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 43.8x on those 2028 earnings, down from 54.9x today. This future PE is greater than the current PE for the IN Logistics industry at 25.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.46%, as per the Simply Wall St company report.

Blue Dart Express Future Earnings Per Share Growth

Risks

• The company has experienced suboptimal asset utilization, particularly with its aircraft fleet, which could negatively affect margins and lead to increased costs if not managed effectively. This may impact earnings negatively.
  
• The CapEx utilization rate was significantly lower than budgeted, indicating potential inefficiencies or delays in executing growth initiatives, which could limit future revenue growth.
  
• Increased focus on surface transport, while beneficial for expanding market reach, might dilute overall profit margins if air transport does not grow in parallel, potentially affecting the company’s overall profitability.
  
• The company faces fierce competition from established players like Delhivery and Safexpress on the ground transport front, which might put pressure on prices and margins, impacting revenues and net margins.
  
• There is uncertainty regarding the ability to sustain margin improvements, as recent EBITDA margin increases were due in part to temporary factors like festive season surcharges, which may not be repeatable, affecting future margins and profits.

Valuation

• The analysts have a consensus price target of ₹7339.143 for Blue Dart Express based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹8114.0, and the most bearish reporting a price target of just ₹6970.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹74.2 billion, earnings will come to ₹5.6 billion, and it would be trading on a PE ratio of 43.8x, assuming you use a discount rate of 13.5%.
• Given the current share price of ₹6367.35, the analyst price target of ₹7339.14 is 13.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.