Buy BlueDart Express; target of Rs 5120: ICICI Securities
ICICI Securities’ research report on BlueDart Express
Bluedart (BDE) manages a dedicated air freight capacity of 425 tonnes with a fleet of six B-757’s freighters. Moreover BDE handles 11091 express support vehicles (outsourced) enabling it to cater over 35000 locations. The company leverages its pan-India reach via 21 ground hubs and 250 network routes. This widespread infrastructure enables the company to have a competitive advantage over existing domestic players and new entrants.
Subsequent to the muted revenue growth of 3% in 9MFY18, we taper our FY18 revenue growth estimates to 5% (vs. 8% earlier). However with the economy set to gather steam, BDE leadership position coupled with strong balance sheet and close to debt-free capital structure is well equipped to ride out the next growth cycle triggered by GST implementation. Subsequently BDE over FY17 has spent Rs 19 crore for consultation and advisory fees making the company future GST-ready. In addition to the same, we expect structural changes like e-way bill coupled with formalization of sector would put Bluedart on strong footing in the coming years. Also, as the economy improves, given its strong client base, BDE’s business model provides earnings visibility. We believe growth will accrue gradually over a time frame and, hence, continue to value BDE on a DCF model to arrive at a target price of Rs 5120 (implied P/E of 55x) with a BUY recommendation.
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