200% return in 9 months! Should you invest in Radhakishan Damani’s top logistics bet?

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Logistics service provider Blue Dart Express has been buzzing in investing world due to its superlative performance on Dalal Street since August last year. Shares of the company have climbed 198% to Rs 5,630 on May 18 (at 10.30 am) from Rs 1,887.30 on August 17 last year. On the other hand, the benchmark BSE Sensex has gained 30% during the same period.

Ace stock picker Radhakishan Damani’s investment arm Bright Star Investments held 4,65,770 shares, or 1.96%, stake in the company as of March 31. Damani is a billionaire investor, businessman and the founder of D-Mart. Going with market watchers, cost efficiency measures and a hike in shipment prices aided the company in the recent past. Analysts on Dalal Street hold mixed views on the company post Q4 results.

Q4 results

The company recently reported a consolidated net profit of Rs 90 crore for the fourth quarter ended March 2021. It had posted a net loss of Rs 30.57 crore in the January-March period a year ago. Total income was up 34.11% to Rs 975.64 crore as against Rs 727.49 crore in the corresponding quarter of the previous fiscal. For the fiscal year 2020-21, the company reported a net profit of Rs 101.81 crore. It had logged a net loss of Rs 41.86 crore in the previous year.

Should you invest now?

Brokerage Elara Capital has a ‘Buy’ call on Blue Dart Express with a price target of Rs 6,226, indicating an upside of nearly 11% from the current market price.

“With cost rationalisation initiatives being implemented in the past year, focus shifts to volume growth, which has been muted for the past two years. We expect volume to grow in the high single digits, led by growth in GDP, new customer additions, omnichannel tie-ups, eCommerce growth and value-added services. We expect standalone EBITDA margin to sustain in the range of 12-14% over FY22-23E. We raise our earnings by 18% for FY23,” the brokerage said.

Edelweiss Securities is also bullish on the company with a price target of Rs 6,425. “After being negative on Blue Dart Express for over two years (2018-20), we had turned positive in October 2020 as we believed its most fundamental problems (high fixed cost, unfavourable business mix, rising competition) were behind. Two quarters on, this thesis is playing out strongly,” Edelweiss said.

It further added that Q4FY21 has turned out to be yet another good quarter, turnover-wise as well as on margins, as Blue Dart Express has regained pricing power without volume loss.