BlueDart Express (BLUDAR)

CMP: | 2750 Target: | 3140 ( 14%) Target Period: 12 months HOLD

May 17, 2019

Strategic investments continue to weigh on margins

BlueDart’s’ management has described the business environment during
the quarter as challenging and ascribed negative impact on the profitability

Result Update
due to ongoing strategic investments, to be expected in the short term but
would create long term value for business and stakeholders. Revenues grew
9% YoY, buoyed by strong growth in the B2B segment, whereas the B2C Particulars
segment remained muted. On the EBITDA front, margins contracted 420 bps Particular Amount
to 3.7%, mainly led by the impact of the expanded asset reach related Market Capitalization (| crore) 6,525
expenses (network, admin and manpower related costs). Subsequently, the Total Debt (FY18) (| Crore) 308.7
absolute EBITDA and PAT declined 50% and 62%, respectively. The Cash (FY18) (| Crore) 228.7
management expects the business environment to improve post elections. EV (| Crore) 6,605.2
52 week H/L 3920\2620
Widespread infrastructure to provide competitive edge Equity Capital (| Crore) 23.7
Face Value (|) 10.0
As per the management, BlueDart reached ~18000 pin codes & expects to
reach ~19200 pin-codes across India in few months. With this feat, it expects
to remain the preferred logistics partner in all Tier 1, 2, 3, 4 cities. The Key Highlights
company has also undertaken an investment programme for two to three  Change from Buy to Hold
years that will make it ready for the next leg of growth, which includes
aggressive reach expansion, focus on emerging markets, sectors and SMEs  Business environment remained
etc. The widespread infrastructure and a push towards automation and challenging in Q4FY19 but is
building a strong IT network will enable the company to have a competitive expected to improve post-election

ICICI Securities – Retail Equity Research

advantage over existing domestic players and new entrants.
 B2B:B2C and air: surface split for the
B2B, B2C segments expected to remain strong company is at 78:22 and 76:24,
respectively
For FY19, the B2B: B2C and air: surface split for the company is at 78:22 and
76:24, respectively. BlueDart is the market leader in the B2B and air segment  BlueDart has undertaken an
(~47% market share). With an improvement in the road infrastructure, investment programme for two to
regulations benefitting organised players (GST, E-way bill, etc) and booming three years that will make it ready for
growth in the e-commerce (30-50% logistics outsourced), the management the next leg of growth
is bullish on the growing opportunities in the surface logistics (20%+ growth
expected, current market share at ~16%). Research Analyst
Bharat Chhoda
Outlook and Valuation bharat.chhoda@icicisecurities.com
Rising investment related costs has been exacerbated by subdued Harshal Mehta
environment in Q4. We largely expect the environment to improve post harshal.mehta@icicisecurities.com
Q1FY20 (post elections). The management is of the view that it takes 12-18
months for the incremental assets to start delivering in a positive manner for
the company and ultimately lead to rise in the blended margins (we expect
margins to rise in FY21). Also, as the economy improves, given its strong
client base, BDE’s business model provides earnings visibility. However, due
to higher competition in the B2C segment and continued capex, we change
our stance to HOLD recommendation, valuing at 40x FY21 earnings to arrive
at a target price of | 3140.

Key Financial Summary

| crore FY17 FY18 FY19P FY20E FY21E CAGR (%)
Net Sales 2689.5 2799.2 3174.4 3634.1 4159.1 11.5
EBITDA 341.7 351.3 285.5 330.7 440.9 6.6
EBITDA margins (%) 12.7 12.5 9.0 9.1 10.6
PAT 137.0 144.7 89.8 115.3 186.5 8.0
P/E (x) 46.7 45.2 72.8 56.6 35.0
P/B (x) 15.2 12.3 11.3 10.5 9.4
RoCE (%) 32.2 29.3 16.9 20.1 29.1
RoE (%) 32.6 27.2 15.5 18.5 26.7
 Result Update | BlueDart Express ICICI Direct Research

Exhibit 1: Variance Analysis

Q4FY19 Q4FY19E Q4FY18 YoY (%) Q3FY19 QoQ (%) Comments
Higher than estimated revenues mainly due to a strong B2B
Revenue 779.3 759.8 716.8 8.7 855.5 -8.9
revenues
Freight Handling & Service cost 527.6 509.1 465.9 13.2 557.5 -5.4
Higher employee expenses indicating continued higher
Employee Expenses 131.0 129.2 114.8 14.2 148.2 -11.6
investments in expanding reach of the company
Administrative & Oth Expenses 92.0 76.0 79.3 16.0 89.6 2.7
Total Expense 750.7 714.2 660.0 13.7 795.4 -5.6
EBITDA 28.6 45.6 56.8 -49.6 60.1 -52.3
EBITDA Margin (%) 3.7 6.0 7.9 -424 bps 7.0 -335 bps Continued investments negatively weighed on margins
Depreciation 13.1 11.6 11.1 18.8 12.5 5.0
Interest 3.3 3.8 3.9 -15.8 4.2 -22.9
Other Income 4.7 4.5 5.3 -11.6 4.4 6.9
Exceptional Gain/Loss 0.0 0.0 0.0 - 0.0 -
PBT 16.9 34.7 47.1 -64.1 47.7 -64.6
Total Tax 4.0 12.2 13.0 -68.9 16.3 -75.3
PAT 12.9 22.6 34.1 -62.3 31.4 -59.0 In sync with EBITDA
Source: ICICI Direct Research

Exhibit 2: Key Metrics

FY20E FY21E
(| Crore) FY18 FY19 Old New % Change Old New % Change Comments
Revenue 2,799.2 3,174.4 3,564.0 3,634.1 2.0 4,134.1 4,159.1 0.6
EBITDA 351.3 285.5 345.7 330.7 -4.3 446.5 440.9 -1.3
Higher growth in surface transport and
EBITDA Margin (%) 12.5 9.0 9.7 9.1 -60 bps 10.8 10.6 -20 bps continued investments, expected to impact
margins
PAT 144.7 89.8 140.7 115.3 -18.0 206.9 186.5 -9.8
EPS (|) 60.9 37.8 59.2 48.5 -18.0 87.1 78.5 -9.9
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 2

 Result Update | BlueDart Express ICICI Direct Research

Key Metrics

Exhibit 3: Tonnage expected to grow at 9% CAGR FY19-21E Exhibit 4: Shipments to grow at 9% CAGR in FY19-21E
1,000 897 48 350 200
823 287.0
755 46 46 263.3
800 697 280 159.8 241.6 160
641 145.3 142.1 144.9
596 44 44 138.0 |
600 197 131.4
43 210 185.05 120
42 42 42 | 160.37
400 140 80
40 40
200 38 70 40

0 36
0 0
FY16 FY17 FY18 FY19 FY20E FY21E
FY 16 FY 17 FY18 FY19 FY20E FY21E
Tonnage handled (000 tonnes) Revenue per kg Shipments (mn) Revenue per shipment (RHS)
Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

Exhibit 5: Revenues to grow at CAGR of 14% over FY19-21E Exhibit 6: EBITDA to grow at CAGR of 24% over FY19-21E
5,000 500 440.918
4,159.1 406.215.9 16
4,000 3,634.1 400 341.7 351.3 14
330.7
3,174.4 12.7 12.5 285.5 12
2,689.5 2,799.2 er300 10.6 10
er 3,000 2,562.9 roc %
roc 9.0 9.1
|200 8
|2,000 6
100 4
1,000 2
0 0
0 FY 16 FY 17 FY 18 FY 19 FY 20E FY 21E
FY 16 FY 17 FY 18 FY 19 FY 20E FY 21E
Revenues EBITDA EBITDA margins (%)
Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

Exhibit 7: PAT to grow at CAGR of 44% over FY19-21E

250
192.1 186.5
200

137.0 144.7
reo150
rc 115.3
| 89.8
100

50

0
FY 16 FY 17 FY 18 FY 19 FY 20E FY 21E

PAT
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 3

 Result Update | BlueDart Express ICICI Direct Research

Exhibit 8: Valuation ratios

Sales Sales EPS EPS PE EV/EBITDA RoNW RoCE
(| cr) Growth (%) (|) Growth (%) (x) (x) (%) (%)
FY17 2689.5 4.9 58.9 -29.0 46.7 19.3 32.6 32.2
FY18 2799.2 4.1 60.9 3.5 45.2 18.8 27.2 29.3
FY19E 3174.4 13.4 37.8 -38.0 72.8 23.4 15.5 16.9
FY20E 3634.1 14.5 48.5 28.5 56.6 20.2 18.5 20.1
FY21E 4159.1 14.4 78.5 61.7 35.0 14.9 26.7 29.1
Source: Company, ICICI Direct Research

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 Result Update | BlueDart Express ICICI Direct Research

Exhibit 9: Recommendation history vs Consensus

7,000 70.0

6,000 60.0

5,000 50.0

)| 4,000 40.0
( )
%
(
3,000 30.0

2,000 20.0

1,000 10.0

0 0.0
Jun-16 Oct-16 Feb-17 Jul-17 Nov-17 Mar-18 Aug-18 Dec-18 May-19

Series1 Idirect target Consensus Target Mean % Consensus with BUY

Source: ICICI Direct Research; Reuters

Exhibit 10: Shareholders Exhibit 11: Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Jun-18 Sep-18 Dec-18 Mar-19
1 DHL Express Singapore Pte. Ltd. 31-Mar-19 75.0 17.8 0.0 Promoter 75.0 75.0 75.0 75.0
2 ICICI Prudential Life Insurance Company Ltd. 31-Mar-19 3.6 0.9 0.2 FII 5.6 5.6 4.5 4.5
3 Bright Star Investments Pvt. Ltd. 31-Mar-19 3.4 0.8 0.0 DII 7.6 3.9 3.1 2.3
4 Life Insurance Corporation of India 31-Dec-18 2.6 0.6 0.1 Others 11.9 15.5 17.5 18.2
5 Matthews International Capital Management, L.L.C.
31-Dec-18 2.1 0.5 0.0 Source: ICICI Direct Research, Reuters, Company
6 ICICI Prudential Asset Management Co. Ltd. 31-Dec-18 1.6 0.4 0.0
7 Damani Estates & Finance Pvt. Ltd. 31-Mar-19 1.3 0.3 0.0
8 The Vanguard Group, Inc. 31-Mar-19 0.8 0.2 0.0
9 SBI Funds Management Pvt. Ltd. 31-Mar-19 0.6 0.1 0.0
10 BlackRock Institutional Trust Company, N.A. 31-Mar-19 0.5 0.1 0.0
Source: ICICI Direct Research, Reuters, Company

Exhibit 12: Recent Activity

Buys Sells
Investor name Value Shares Investor name Value Shares
ICICI Prudential Life Insurance Company Ltd. 10.04 0.19 First State Investments (Singapore) -5.94 -0.12
Life Insurance Corporation of India 2.45 0.05 Stewart Investors -3.96 -0.08
Eastspring Investments (Singapore) Limited 0.14 0.00 Morgan Stanley Investment Management (India) Pvt. Ltd.
-3.88 -0.08
BlackRock Institutional Trust Company, N.A. 0.03 0.00 HDFC Asset Management Co., Ltd. -1.43 -0.03
Reliance Nippon Life Asset Management Limited 0.03 0.00 Baroda Asset Management India Ltd -0.56 -0.01
Source: ICICI Direct Research, Reuters

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 Result Update | BlueDart Express ICICI Direct Research

Exhibit 13: Profit & Loss Statement | crore Exhibit 14: Cash flow Statement | crore
(Year-end March) FY18 FY19 FY20E FY21E (Year-end March) FY18 FY19E FY20E FY21E
Total operating Income 2,799.2 3,174.4 3,634.1 4,159.1 Profit after Tax 144.7 89.8 115.3 186.5
Growth (%) 4.1 13.4 14.5 14.4 Add: Depreciation 114.5 127.9 144.7 157.2
Operating and handling costs 1,127.8 1,283.7 1,526.3 1,746.8 Add: Interest 40.5 42.7 37.5 32.4
Other Aircraft Expenses 115.7 190.5 218.0 249.5 Increase in Current Liabilities 100.5 171.5 -30.4 63.3
Fuel Charges 194.4 238.1 254.4 291.1 Increase in Current Assets -30.6 -83.3 -12.2 -77.8
Other Operating Expenses 41.0 54.0 61.8 70.7 Others -52.9 0.0 0.0 0.0
Employee Cost 584.5 698.4 745.0 790.2 CF from operating activities 316.7 348.5 254.9 361.5
Other Expenses 384.6 424.4 497.9 569.8 (Inc)/dec in Investments 0.4 -1.1 -10.0 -10.0
Total Expenditure 2,448.0 2,889.0 3,303.4 3,718.2 (Inc)/dec in Fixed Assets -199.5 -255.4 -110.0 -110.0
EBITDA 351.3 285.5 330.7 440.9 Others 9.3 -107.9 0.0 0.0
Growth (%) 0.0 -0.2 0.2 0.3 CF from investing activities -189.8 -364.4 -120.0 -120.0
Depreciation 114.5 127.9 144.7 157.2 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Interest 40.5 42.7 37.5 32.4 Inc/(dec) in loan funds -68.6 90.1 -60.0 -60.0
Other Income 20.7 19.2 23.6 27.0 Less: Interest -40.5 -42.7 -37.5 -32.4
PBT 217.0 134.1 172.2 278.4 Others -8.3 -35.7 -69.4 -112.3
Tax 72.3 44.4 56.8 91.9 CF from financing activities -117.4 11.8 -166.9 -204.6
Adjusted PAT 144.7 89.8 115.3 186.5 Net Cash flow 9.5 -4.1 -32.0 36.9
Growth (%) 3.5 -38.0 28.5 61.7 Opening Cash 265.0 274.6 270.4 238.4
EPS 60.9 37.8 48.5 78.5 Closing Cash 274.6 270.4 238.4 275.3
Source: ICICI Direct Research Source: ICICI Direct Research

Exhibit 15: Balance Sheet | crore Exhibit 16: Key Ratios

(Year-end March) FY18 FY19P FY20E FY21E (Year-end March) FY18 FY19P FY20E FY21E
Liabilities Per share data (|)
Equity Capital 23.8 23.8 23.8 23.8 EPS 60.9 37.8 48.5 78.5
Reserve and Surplus 508.1 554.0 599.9 674.1 Cash EPS 109.1 91.6 109.4 144.6
Total Shareholders funds 531.8 577.7 623.6 697.9 BV 252.1 276.1 319.7 344.1
Total Debt 406.1 496.2 436.2 376.2 DPS 15.0 12.5 24.3 39.3
Long term Provisions 4.4 3.6 3.6 3.6 Cash Per Share 96.2 113.8 100.4 115.9
Other Long term liabilities 16.3 20.0 20.0 20.0 Operating Ratios (%)
Deferred Tax Liability 0.00 0.00 0.00 0.00 EBITDA Margin (%) 12.5 9.0 9.1 10.6
Total Liabilities 958.6 1,097.5 1,083.4 1,097.7 PBT / Total Operating income 7.8 4.2 4.7 6.7
Assets PAT Margin 5.2 2.8 3.2 4.5
Gross Block 793.3 1,057.2 1,157.2 1,257.2 Inventory days 2.8 3.0 3.0 3.0
Less: Acc Depreciation 275.0 402.9 547.5 704.7 Debtor days 55.1 56.5 50.0 50.0
Net Block 518.3 654.4 609.7 552.6 Creditor days 48.0 49.9 40.0 40.0
Capital WIP 99.2 90.7 100.7 110.7 Return Ratios (%)
Total Fixed Assets 617.5 745.0 710.4 663.2 RoE 27.2 15.5 18.5 26.7
Non-current Investments 55.8 56.9 66.9 76.9 RoCE 29.3 16.9 20.1 29.1
Other Non-current assets 69.2 109.6 109.6 109.6 RoIC 43.8 26.7 31.1 50.2
Deferred Tax Asset 20.3 36.6 36.6 36.6 Valuation Ratios (x)
Inventory 21.3 26.0 29.9 34.2 P/E 45.2 72.8 56.6 35.0
Debtors 422.3 491.0 497.8 569.7 EV/EBITDA 18.4 22.6 19.7 13.7
Loans and Advances 1.0 0.9 0.9 1.0 EV/Sales 2.3 2.0 1.8 1.4
Other Current Assets 66.6 76.5 78.0 79.6 Market Cap / Sales 2.3 2.1 1.8 1.6
Cash 228.7 270.4 238.4 275.3 Price to Book Value 12.3 11.3 10.5 9.4
Current investments 0.0 0.0 0.0 0.0 Solvency Ratios
Total Current Assets 739.8 864.9 845.1 959.8 Debt/EBITDA 1.2 1.7 1.3 0.9
Creditors 368.4 434.3 398.3 455.8 Debt / Equity 0.6 0.7 0.6 0.5
Other liab & Provisions 175.6 281.2 286.8 292.6 Current Ratio 1.2 1.1 1.1 1.2
Total Current Liabilities 544.0 715.5 685.1 748.4 Quick Ratio 1.8 1.8 1.9 2.3
Net Current Assets 195.8 149.4 160.0 211.4 Source: ICICI Direct Research

Application of Funds 958.6 1,097.5 1,083.4 1,097.7

Source: ICICI Direct Research

ICICI Securities | Retail Research 6

 Result Update | BlueDart Express ICICI Direct Research

Exhibit 17: I-Direct coverage universe (Logistics)

CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
Sector / Company
(|) TP(|) Rating (| Cr) FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E
Container Corporation 466 625 BUY 28,369 14.1 18.2 20.1 19.6 36.5 28.2 25.6 26.2 6.7 5.4 5.9 3.7 9.8 11.3 12.8 13.8
Transport Corp. of India 289 350 BUY 2,217 10.7 16.1 22.0 27.3 25.2 16.8 12.3 9.9 14.4 11.0 8.4 7.0 10.7 13.4 15.1 15.8
BlueDart 2,750 3,140 BUY 6,525 58.9 60.9 37.8 48.5 46.7 45.2 72.8 56.6 19.3 18.4 22.6 19.7 32.2 29.3 16.9 20.1
Gati Ltd. 75 75 Hold 810 1.2 3.2 1.2 2.6 59.1 22.6 60.9 27.8 9.2 13.7 11.6 8.2 7.6 6.0 7.2 10.3
Gujarat Pipavav 86 90 BUY 4,187 5.8 4.6 4.9 5.5 14.7 18.8 17.6 15.6 9.1 10.0 9.3 8.4 14.0 12.1 12.2 13.6
TCI Express 638 780 BUY 2,444 9.8 19.5 19.5 24.4 65.9 33.1 33.1 26.4 40.3 20.8 20.8 16.6 31.9 38.3 38.3 36.4
Source: ICICI Direct Research, Bloomberg

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 Result Update | BlueDart Express ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as
the analysts' valuation for a stock

Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093

research@icicidirect.com

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 Result Update | BlueDart Express ICICI Direct Research

ANALYST CERTIFICATION
I/We, Bharat Chhoda, MBA; Harshal Mehta MTech (Biotech) , Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views
about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above
mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in
the report

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ICICI Securities | Retail Research 9