MUMBAI
:
Blue Dart Express Ltd’s revenue and profitability trajectory is struggling to take off, squeezed by rising competition, sluggish market demand and the additional burden of increased costs from recent aircraft additions.
Its FY24 consolidated revenue growth stood at just about 2%, with volume remaining lacklustre. This is a stark contrast to the 17% growth seen in FY23. The company’s performance in the June quarter (Q1FY25) mirrored the sluggish off-season, with revenue year-on-year (y-o-y) growth at 8.5%.
However, the upcoming festive season offers a glimmer of hope. As the season kicks in, Blue Dart expects capacity utilization of its new aircraft to improve. Currently, the utilization rate of the two new freighters is 75-80%, just below the break-even level of 85-90%. Reaching optimal utilization levels could boost efficiency and margins.
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The company added two new aircraft to tap into the growing demand in tier-II and tier-III cities, where it sees long-term growth potential. These new aircraft have allowed Blue Dart to replace third-party volume with in-house operations, reducing the share of third-party cargo from 20-25% to 10-11%. New routes, such as Guwahati, are beginning to ramp up and should gain momentum.
Expansion push
Meanwhile, the surface express segment, which now contributes 30% of Blue Dart’s revenue, is emerging as a key growth driver. In Q1FY25, the surface express segment saw strong growth compared to air volumes. Further, e-commerce remains a significant growth engine, accounting for one-fourth of the company’s total revenue.
Despite its potential, surface logistics is fiercely competitive, and that can continue to pressure margins. As Blue Dart pushes forward with network expansion and infrastructure development, near-term margins are likely to remain strained. Ebitda margins have already dropped from 18.1% in FY23 to 16.2% in FY24 and 15.1% in Q1FY25. Ebitda stands for earnings before interest, taxes, depreciation, and amortization.
Amid this, Blue Dart is pushing ahead with its expansion plans—though, for now, it’s a double-edged sword. Significant capital expenditure (capex) is required, given the dull demand. The capex guidance for FY25 has been maintained at ₹250 crore.
Blue Dart’s management remains cautiously optimistic, targeting y-o-y volume growth of 10-12%, consistent with pre-covid levels. It also anticipates a 2-3% improvement in margins, driven by greater efficiency and demand growth.
“Blue Dart is unlikely to touch 18-20% Ebitda margin anytime soon. That said, higher volume growth compared to peers is a key positive,” according to ICICI Securities. The brokerage has raised its FY26 estimated earnings per share by 3%, factoring in slightly higher volume growth.
Nonetheless, investors may wait for meaningful signs of improvement before placing their bets. Blue Dart’s shares trade at 40 times FY26 estimated earnings, showed Bloomberg data and are up 15% in 2024 so far.