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Stock Review: Blue Dart Express

 

 

Considering the strong position enjoyed by Blue Dart Express in the logistics sector, investors could consider this stock on a long term basis

 

BLUE DART Express is a leading player in South Asia for courier and integrated express package distribution. The recovery in the domestic economy and other emerging markets has helped the company post better performance in the past few quarters as it saw a rise in volume of goods transported across its networks.


   The company was started in 1983 by three promoters Clyde Cooper, Tushar Jani and Kushroo Dubash. In 2005, DHL Express (Singapore) took a majority stake in the company.


   We had recommended this stock in our issue dated March 29, 2010, and since then the stock has gained nearly 54.4% compared to a 18% rise in the Sensex. And despite the jump, its valuations do not appear stretched on a historical basis. For instance, this stock is currently trading at 5.9 times its book value for the year ended December 2009. And during the January 2008 and January 2010 period, the company traded in a range of 3.7-5.8 times its trailing book value.

LOGISTICS NETWORK:

Blue Dart Express follows an integrated business model and the company's fleet of four Boeing 757s and three B737 freighter aircraft are operated by Blue Dart Aviation, an associate company. In addition, its network includes over 5,412 vehicles, 52 domestic warehouses and over 13.4 lakh square feet of facility space at the end of December 2009.


   The company's domestic network covers over 25,498 locations, and more than 220 countries and territories worldwide through its sales alliance with DHL. Its expanded logistics network especially in the domestic economy appears well timed, given strong demand conditions from the corporate and consumer sector. Also, the company's brand is well recognised in its segment.


   During the calendar year ended 2009, the company had carried over 7.72 crore domestic shipments, a rise of 10.6% on a CAGR basis from CY06. Also, it had carried over 7.18 lakh international shipments at the end of December 2009, a rise of 4.5% on a CAGR basis during this period. The company had invested 143.2 crore during the period CY09 and CY07, while its operational cash flows during this period amounted to 176.7 crore. The company was debt free during this period.


FINANCIALS:

 

The upturn in the economy helped the company's net sales to rise 24.7% to 294.2 crore in the September 2010 quarter, compared to a year earlier. However, its operating profit margin at 11.8% was broadly flat. Although, not strictly comparable, but Blue Dart Express grew faster than the largest domestic logistics player Container Corporation of India during the earlier three financial years.


   For instance, during the period CY06 and CY09, Blue Dart's net sales grew at a CAGR of 10.7% to 905.2 crore, while net profit grew 5.7%. In contrast, Concor's net sales grew at a CAGR of 6.6% during the period March 2007 and March 2010, while net profit improved by barely 3.8%.

VALUATIONS:

Blue Dart Express at 1,086 per share, trades at a P/E of nearly 28.8 times on a trailing four-quarter basis. This is at a premium given that Container Corporation of India's stock trades at a P/E of 22.1 times on a trailing basis, while Allcargo Global's scrip on a consolidated basis trades at 15 times. Given the strong position enjoyed by Blue Dart Express in its segment of the logistics sector, investors could consider this stock on a long term basis.

 


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