According to analysts, Blue Dart has been delivering better than expected results for past 3 quarters on the back of improved economic activity, traction in e-commerce, higher pricing and several cost rationalization initiatives
Shares of Blue Dart Express Ltd have risen as much as 77% compared to its pre-covid highs. The firm’s market capitalization is now close to its highest in over four years.
Blue Dart has reported a consistent improvement in performance in the past three quarters. Standalone revenues increased 33% year-on-year (y-o-y) to ₹966 crore in the March quarter (Q4FY21). To some extent, a favourable base helped, considering that revenues had declined by 7% in Q4FY20. But even compared to the average quarterly revenue of ₹792 crore in FY20, growth was impressive last quarter at 22%.
“In FY21, Blue Dart Express has gained immensely from the exploding e-commerce industry and we believe revival of the documentation business is likely to have also helped in Q4FY21," analysts at Edelweiss Securities Ltd said in a note to clients.
Revenues had declined significantly by 47% in Q1FY21 due to the nationwide lockdown, but revenues have picked up since. There has also been an improvement in margins.
“After bottoming in 1Q, the company has been delivering better-than-expected results for past three quarters on the back of improved economic activity (driving topline), traction in e-commerce, higher pricing and several cost rationalization initiatives—all contributing to superior margins in consecutive quarters," said analysts from Antique Stock Broking Ltd in a report on 6 May.
For the March quarter, Blue Dart did well on the operating margin front, too. Its earnings before interest, tax, depreciation and amortization (Ebitda) margins expanded by 125 basis points (bps) versus the December quarter to 18%. One basis point is one-hundredth of a percentage point.
One of the main reasons for the increase in margins was the price hike taken by the company in January 2021. Further, employee costs and other expenses declined as a percentage of revenues, aiding margin improvement.
Analysts from Edelweiss Securities Ltd said, “Blue Dart Express has regained pricing power, without volume loss. Post the rightsizing exercise in H2FY20, a leaner cost structure continues to aid margins."
As pointed earlier, investors seem to have taken cognizance of the company’s improving growth.
After all, Blue Dart’s shares have outperformed broader indices by a wide margin since mid-August 2020. But valuations have risen to 45 times one-year forward earnings, and could limit upside.
The company’s shares rose 6% in early trading on Thursday, but gave up the gains by the end of the day’s session.
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