Blue Dart Express Ltd (BDEL)

Investment Rationale
• BDEL is 81 % subsidiary of DHL group-premier global brand name in express distribution services. It is South Asia’s premier courier & integrated express package distribution company, with a distinctive capability to offer entire gamut of express distribution solutions.
• As part of the DHL Group, Blue Dart accesses the largest and most comprehensive express and logistics network worldwide, covering over 220 countries.
• Logistic industry has excellent future ahead and is expected to grow @ CAGR of 20% (+). To exploit emerging opportunities, BDEL is strengthening its infrastructure.
• BDEL is planning investment of Rs.1,000 crore over 5-7 years in air infrastructure, aircraft (planning to add 1 aircraft every year in CY08, CY09 and CY10) & ramping up of ground infrastructure with state of the art facilities, transit hubs with hi-tech material handling equipments
• Has launched new fortified ground express product – Dart Surfaceline, consequent to which, its reach has expanded to over 17,500 locations (14,600), across country. This business can be huge revenue generator for BDEL in future.
• AFL was hitherto providing services of ground support for DHL’s international business. With AFL and DHL cutting off business relationship, this business will come to BDEL
Investment Concerns
• Increase in Aviation Turbine Fuel cost.
• Increased competitive pressures.
Recommendation
• In the past, there was an attempt by DHL Express to delist the shares. Thus it is potential buy back candidate.
At CMP of Rs.597, share is trading at 19.9 times CY 2007 actual consolidated EPS in CY 2007 is Rs..30 and it is expected to be Rs.37 in CY 2008.BDEL’s future looks extremely promising. Hence we recommend to “BUY” the share at CMP with long term perspective.