After multiple quarters of muted performance, Blue Dart posted better than expected show in the September quarter. While revenue growth continues to be a challenge with the company posting a single digit growth number for the third consecutive quarter, gross and operating profit margins were the highest in four quarters signalling a reversal on the profitability front.
Operating profit margins which had hit a multi-year low of 6.9 per cent in the June quarter, rebounded over 400 per cent on a sequential basis to 10.9 per cent in the September quarter. The beat came on the back of higher gross margins and lower overhead costs. The company has been implementing cost control measures in line with the strategy laid out by Mckinsey and this has helped in growing the operating profit by 67 per cent on a sequential basis to about Rs 77 crore. The improvement in operational performance helped the company to post a net profit of Rs 41.4 crore up 96 per cent sequentially but down 3 per cent on a year on year basis.
Going ahead, analysts at Spark Capital expect operating profit margins to expand by a further 225 basis points on the back of improving operating efficiencies over the FY17-19. This should help the company to report a growth of 18 per cent during the period. The key worry, according to the analysts which might have a bearing on costs is the sharp increase in Aviation Turbine Fuel (ATF) prices and will need to be monitored.
Driven by higher volumes, the company posted revenues of Rs 703, up 5-6 per cent over the year ago as well as on a quarter-on-quarter basis. While revenue growth in the e-commerce segment continues to be slow driven by aggressive pricing from competition, higher business-to-business sales especially the surface express segment helped achieve the reported revenues. While GST rollout has had an impact, its effect is expected to reduce going ahead. Analysts at Antique Stock Broking believe that growth in the current fiscal is expected to be in single digit in FY18, though it should improve to 15 per cent year-on-year in FY19.
At the current price the stock is trading at 44 times its FY19 earnings per share estimates. Given the expectations of an improvement in volumes and better operating performance, investors can look at the stock on dips.