Blue Dart gains as economy reopens, demand from e-commerce segment grows

The unlock process and premium pricing have helped improve operational performance

Blue Dart Express has been one of the biggest gainers in the BSE500 index, appreciating 30 per cent over the past month. Reopening of the economy and a spurt in demand from the e-commerce segment have led to an improvement in realisations and volumes. The stock has seen the highest earnings revision for FY22 among BSE 500 companies, with upgrades pegged at 58 per cent.

One of the triggers for the stock has been the better-than-expected September quarter (Q2) performance. Revenues grew 8 per cent in the quarter over the year-ago period and were twice that of Q1. Realisations, too, have improved given the premium charged in certain sectors and segments.

Higher revenues and lower costs led to a spurt in operating profit margins, which rose 10 percentage points from a year ago to over 17 per cent. Despite the higher revenues, tight cost control measures helped it reduce operating expenses by about 3 per cent. Analysts believe the company will be able to sustain margins given its decision to hike prices from January 1, 2021. The blended price hikes would about 3-5 per cent.

Analysts at Edelweiss Research have turned positive on the stock after Q2 results as they perceive a turnaround after three years of poor performance. They have upgraded the stock given the pandemic-induced boom in e-commerce, coupled with a restructured employee costs structure. Further, the fact that Blue Dart would be in the fray for Covid vaccine distribution would add incrementally to revenues in the near term.

Analysts expect the company to gain both in the air and surface cargo segments given unlocking of urban centres. Further, margins on the back of premium pricing are also expected to be steady. However, the sharp increase in prices and fears of a second wave of Covid could impact sales. Investors should await clarity on volume and pricing trends over the next few months before considering the stock.