Blue Dart surges 4% on upgrade from Motilal Oswal

Motilal Oswal Financial Services upgraded its rating on the shares of Blue Dart Express to ‘buy’ from ‘neutral’, with a target price of Rs 8,040.

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Blue Dart Express witnessed a 4 percent surge in its shares on June 21, following an upgrade in the stock rating by Motilal Oswal Financial Services, prompted by the company’s margin expansion and the increase in volume ramp-up within the express distribution sector.

With an improved outlook and around 30 percent correction in the stock price from the highs seen in October 2022, the brokerage firm believes the stock is now attractively valued. Motilal Oswal Financial Services upgraded its rating on the stock to ‘buy’ from ‘neutral’, with a target price of Rs 8,040.

At 9:22 am, shares of the company were trading 2.2 percent higher at Rs 6,894.30 on the BSE.

“For an express logistics airline such as Blue Dart Express, the cost of aviation turbine fuel (ATF) accounts for around 40 percent of direct operating costs,” the brokerage firm said.

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In early FY23, ATF prices rose with Brent, but did not decline when Brent prices declined in the last few quarters. As a result, the company witnessed a shortfall in the recovery of fuel surcharge, hurting its margins. However, ATF prices have now corrected significantly, which should boost Blue Dart Express’ margins going forward, explained Motilal Oswal Financial Services.

Besides, higher capacity utilisation with the new aircrafts is likely to propel volumes, as per the brokerage firm. Blue Dart Express has added two new aircraft to cater to tier-II and tier-III cities as it sees a healthy demand outlook in these cities for the long term, the brokerage firm added.

“As the capacity utilisation of new aircraft ramps up, we expect BDE’s (Blue Dart Express) EBITDA margin to rise to 13-14 percent from second half of FY24 onward from the current level of 10-11 percent,” said the brokerage firm.

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