E-tailing boosts Blue Dart's prospects

News Clip:HT Mint, Mumbai

04 December, 2014

Investors are happily giving higher valuations to anything that has something to do with e-commerce. And Blue Dart Express Ltd has a bit to do with online retailing. Small wonder the company's shares have outperformed the BSE 500 index by a good margin so far this fiscal year.

What's more, the online retailing segment is expected to emerge as an important revenue growth driver for Blue Dart. The integrated express package distribution company is equipped to cater to the fast growing requirements of online retail companies.

In fact, revenue contribution from the segment has increased over a period of time. In 2010, as the online retail market began to show green shoots, Blue Dart derived nearly 3% of its revenue from the e-commerce segment. Currently, the segment contributes nearly 18% of total revenue, registering a compounded annual growth rate of nearly 78% over 2009-14, pointed out ICICI Securities Ltd in a note last October.

In the September quarter, Blue Dart's revenue increased by 23% over the same period last year to Rs.582 crore. Revenue growth was the best in at least the past three quarters and got a boost from the strong revenue growth in the online retail segment. However, profit margin fell. According to Blue Dart's investor presentation, September quarter PBIDT margin decreased to 9.8% from 12.1% seen in the June quarter. PBIDT refers to profit before interest, depreciation and taxes.

Also, net profit growth in the September quarter lagged revenue growth considerably even though it was better than the net profit performance in the earlier two quarters. Blue Dart's net profit last quarter had increased by 2.5% to Rs.30.8 crore.

Investors don't seem perturbed. Growth in the online retailing segment is expected to play a big role in the company's growth. In fact, Blue Dart could very well have to try hard and hit the bulls-eye as far as online retailing is concerned to sustain its high valuations. "We are positive on the revenue growth prospects of express segment and e-commerce segment on the back of improvement in economic growth but considering rich valuations, we maintain our SELL rating," said IDBI Capital Market Services Ltd in a 20 October note.