Blue Dart: Carrying value

News Clip : The Hindu Business Line,

April, 2003.

Source : Nath Balakrishnan, BL Research Bureau

Fresh exposures can be contemplated in the stock of Blue Dart Express, The stock currently trades at Rs 56 at a price earnings multiple of 6.3 times its year-ended March 2003 earnings. Downside from the current price levels is limited.

The company has posted a profit after tax of Rs 6.4 crore (compared to Rs 5,1 crore on a quarter-on-quarter basis), an increase of 25 per cent. Top line grew by a modest 10 per cent in the same period. The performance has to be seen in the context of a challenging business environment that the company operated in over the past quarter.

Shipments of drugs and pharmaceuticals in the latest quarter received a setback on the uncertainty over value-added tax, The company also had to confront rising prices of air turbine fuel. Blue Dart operates a dedicated fleet of three aircraft to support its operations, Going forward, with prices of air turbine fuel expected to stabilise with the cessation of hostilities in Iraq, it should have a favourable impact on the company's cost of operations.

The company derives about 80 per cent of its revenues from domestic operations and has a strong network across the country. Its tie-up with DHL (after it severed links with FedEx in September last year) also provides considerable leverage and flexibility in its business operations.

A position of pre-eminence in the domestic industry, substantial investments that it has made on the technology front that enables customers to track the status of their shipments in real time and an ability to provide logistical solutions to its clients are the positives in favour of Blue Dart.

Though its business fortunes are Determined by the health of the economy as well as the exposure to fluctuating fuel prices, the current scenario does not hold the possibility of these factors impacting the company negatively.