Blue Dart Express Limited (526612) Earnings Call Transcript & Summary

Good afternoon, investors. We are sorry for a little delay -- 3 to 4 minutes delay. And we concluded successfully our Board meeting yesterday for approval of audited financial accounts and for recommendation of dividend. And we have this earnings call, along with me, our CFO, Sudha Pai, is there; and Vice President, Corporate Accounts; Mr. Sagar Patil is there. With this, since Motilal Oswal is facilitating the call, I would request Alok to take over and facilitate. Thank you.

Thank you so much. So good afternoon, everyone, and welcome to the interaction with the management of Blue Dart Express. Firstly, I would like to thank the management for giving us the opportunity to host the call. So today, we have with us Mr. Sudha Pai, CFO, Blue Dart Express; Mr. Tushar Gunderia, Head of Legal and Compliance and Company Secretary Blue Dart Express; Mr. Sagar Patil, Head of Corporate Accounts Blue Dart Express. So I would now request the management team to provide some opening remarks on the Q4 performance, and then we can start with the Q&A session. Thank you, and over to you, sir.

Yes. So good afternoon all. So as you would have been aware, we have closed our annual accounts, and the company has published the financial results.

Sir, if you can just be a little louder.

Yes, yes. So the company has reported positive financial results in terms of growth, growth in the top line as well as the bottom line. With the investments that we have done in last few quarters, especially both in terms of new routes, new facilities as well as new aircraft that we have now which have gone live in the last quarter in terms of rolling out with the new route that we have started operating from Guwahati. The company has been able to maintain the margin. So there is a good development in terms of capacity utilization. So with the positive revenue growth as well as an improvement at the PAT level, we are on the course to have consistent financial performance. So yes. Thanks.

So thank you so much for the opening remarks. So any one having questions can please raise their hand or post it in the chat box below. So, sir, we'll start with the Q&A session. So first we'll take the question from Mr. [ Jeet Shah ]. Please go ahead.

The margin improvement in this quarter is largely because of high-value cargo coming in? Or is there any other reason? Like can you just give me a little color on that?

So you're saying about the margin improvement, right? It's driven by both. One is that we did our annual price increase and -- which is why vis-à-vis last year it's an increase in the margins accordingly like plus all other business reasons like dense cargo and as Sagar also mentioned, coupled with better utilization of our cost of our investment. These are the factors leading to a good margin.

We'll take next question from Mr. [ Dhaval Shah ].

A couple of questions from my side. So on the margin front, if you can help us understand which segment is -- has helped us to get the volume growth? It's been a good 8%, 9% volume growth. And in terms of fleet utilizations level, what is the percent utilization of the fleet and how it has progressed over the last 3 quarters? And what is your expectations for the next financial year, FY '25? How do you see the volume growth for the company?

So with regards to the segment wise, as you asked, we do not publish any segment-wise revenue but would say that, we are seeing a good growth on all of our major of our product, which is air and ground on both the sides, we are seeing a growth there, both in terms of volumes as well as in terms of shipments, both again on a quarter-on-quarter basis as well as on a Y-o-Y basis. That's on the volume part. Regarding the utilization of the aircraft, yes, we did an investment of 2 new aircrafts, and it's been almost like effective 1 year and I would say that we are fairly well utilized in terms of our existing capacity. Yes, of course, there is a scope to improve further and make our utilization of the aircraft better. Guwahati is a new lane, and it's a new geography. So there is a scope for improvement over there. But over -- largely in terms of our aircraft utilization, we are decently covered up. That's the...

Any utilization number would you like to share?

So it would -- we have -- our aircrafts run from one sector to another, like, so we measure on terms of our sectors, like , and we have at least more than 5 to 7 sectors. Like, on an average, it's safe to say that between 75 to 80 would be the -- 85 would be the range, depending upon the average of the month that has been trended. But that's a percentage utilization you can assume on the overall fleet capacity that we're having.

Okay. And when -- and by segment, I mean, ma'am, the end customer segment like we've always -- in the past, we were -- we used to talk about e-commerce segment, auto segment, then high-value engineering goods, electronics. So which consumer segment -- customer segment has helped us to show a good growth?

Sagar, would you want to have this?

Yes. So in terms of the customer vertical growth, we see the growth continuing, especially in the e-commerce, the e-tail vertical that we have, which is also how we look at our subproducts at times. So that has continued to grow and especially the Dart Plus, the product that we have, which is more like speed trucking, moves on the road somewhere in between air and normal ground, that has continued to grow healthy. Our documents also is continuing to grow positively. And with the new aircraft, we see a traction. So also coming to the air parcels as such. But majorly, yes, the e-commerce has been the growth driver.

Interesting. Okay. So this e-commerce would mean the likes of, I mean, the omnichannel plus the pure e-commerce players like Flipkart, Amazon, right?

Yes, yes. Yes. A combination of even the porters as well as the customers having their own sale via online sales.

Okay. And how is the pricing environment in the e-commerce vertical for us? I mean what sort of competition level, is something stabilizing in terms of the pricing?

So the pricing scenario is quite competitive. And I mean, with our focus on the service quality in terms of ability to deliver the fastest and the operations also focusing on that kind of thing. We -- to some extent, I would say, yes, Blue Dart is seen as a premium player. However, the scenario is quite competitive. And then we do try and have sharp pricing, especially for the key customers, wherein we try to -- while without diluting the pricing, but we try and, I would say, gain more on the value that we provide depending on the customer, I would say, segments as well as the product segment in which the customers are. So the more time sensitivity, the more discretionary the purchase items are there on online. The customers would prefer them to reach faster. So that is where our air e-commerce becomes very handy for the customers, and we are able to get some premium over there. Dart Plus, which is on the road is where everybody else is kind of in. But we -- there also, since we are more on speed trucking, we are able to attract some good prices. Having said that, it's always a catch and run kind of scenario when it comes to e-commerce. But good to also note that we are continuing to grow there and without giving up the margins.

Okay. And lastly, sir, what will be your volume expectation for FY '25? We've done around 12 lakh tonnes for '24. And also with the improved volume, can we see around 18%, 19% EBITDA margin? These are -- this is my last question.

So we would not be able to forecast the numbers sort of forward-looking statement, but we are continuing the path on which we set ourselves on. So the management will work on improving the business further and continue to do what we have been doing good.

Sir, one question we'll take from the chatbox. What would be the tonnage for this particular quarter end? What would be the share of documentation within that?

We don't give any segmental information. Within our product we do not give any information in public as far as the segmental product wise is concerned.

Sure. And what would be the volume for this particular quarter. This is -- that was not mentioned. That's part of the question, which has come.

For the quarter -- 296 -- you are saying...

Tonnage and shipments for the quarter.

It is 91.72 million shipments and weight is 296,988 tonnage -- tonnes.

We will take next question from the queue. So we will take Mr. Mandar Pawar from Kotak AMC, please go ahead.

I hope I'm audible. So team, I wanted to ask the question on the GPI, which you indicated has also helped on the margins. Now if I look at the realization, the realization on a per shipment or a per tonnage basis has been flat on a Y-o-Y basis as well on a Q-o-Q basis. So just wanted to understand how do we read into this? How much GPI, where the benefit is accruing, and to what extent, because we understand this 9.5% kind of GPI increase is an indicative number, but how much is the actual flow through, which is coming in post the negotiation with the clients?

So the thing is that you wouldn't see a realization if you compare on a Y-o-Y basis in your RPS or RPK thing because there is a combination of the shifts that would happen from air to ground like. And as my colleague just gave an overview that on the ground, Dart Plus we did quite very well, which would be in that and on the ground prices are relatively lesser compared to the air like. So that way, that comparability, if you look on an overall product basis, you may find that, okay, the realization has effectively -- you don't see a great movement, but when we do our internal analysis, that's the observation that we are seeing in terms of how GPI has bought improved margins and so on. Like -- so that's on the RP -- I mean, the yield point -- yield related question that you raised. And with regards to the GPI, it's been a fairly effective price hike that was pushed through in this particular quarter. We do not publish the actual numbers or percentage of how much has been the effective GPI. But it's reflecting in the EBITDA and in the margins.

Okay. All right. And one quick question on the -- our handling capacity. So we have done 12 lakh tonnes of volume in this financial year. Now based on the 2 aircraft addition that we have done and the capacity increase that we have now, how can you translate that to how much capacity or how much volumes can this capacity handle? So this 12 lakh tonnes of volumes, if all assets ground as well as air assets are optimally utilized, what can that capacity number be?

So you're asking in terms of effective utilization percentage here?

In a way, yes.

Yes. So as one of the gentlemen even asked us in the beginning, I would like to say that our total capacity utilization on our air fleet ranges between 75 to 85 percentage. And with the new capacity that is being added, it's a fairly decent utilization within the first year of deployments of this new capacity. So that's the overview we can say, that is reflected in the financials.

Right. But 75% to 85% is quite a broad range. And I believe the margins that you do between at 75% utilization and at 85% utilization there could be a huge margin difference there. So that's why -- so the other way of putting out is if there is 12 lakh tonnes of volumes that we have done or let's say, nearly 3 lakhs in this quarter, if we annualize this that will translate to what, 75%, 80%, 85%? If you can give us some kind of a number there.

Sorry, I didn't get the question there.

So I'm saying, 75% to 85%, you are saying is the utilization that we try to achieve and then -- by itself, it's a very broad range, where I think [indiscernible] at 75% and at 85%. Now if you are handling 3 lakh tonnes of volumes in Q4, and the capacity that we have with these 2 aircraft addition what would be that utilization number be?

In terms of absolute tonnages, you're saying or because...

So we have done 3 lakh tonne volume, right? 2.97 lakh, if I do the backward calculation on the numbers.

But that's between air and ground, both like. That's between air and ground.

Fair enough. So I'm saying ground as well as air on that kind of combined capacity, the current fleet that we have and the aircraft that we have, on an annualized basis, how much volumes can be done when we reach an optimum level of utilization of these assets?

Desirable -- okay. So to answer that question, the ground is always effectively utilized like -- so on the air -- air, the optimum utilization, the desirable level is 90% -- between 90% to 92% is what we aim at. When we say that an aircraft has been effectively utilized like. And within the full year -- for the full year on a Y-o-Y basis, considering that there would be a bit of a lower utilization in the beginning months of the year, and then it would be -- the utilization improves, and which is why this range was provided. But on an average, it would -- between 80%, 85% -- 80%, 82% would be our -- the best utilization percentage for the year like.

So we'll take the next question from Mr. [ Pritesh ] please go ahead.

Yes. Just a clarification first. So between the utilization and the volume that we have seen getting added, is it fair to assume that though you have added the aircraft, a lot of the volumes which were going on third party has first shifted to your own aircraft? That's the first -- that's a proper assumption from our side?

Yes. So when a new aircraft is -- ideally, a new aircraft is added, looking at the trend of the volumes that are going currently on the commercial side. And the aim of -- when we introduce a new capacity in our air fleet, the intention is to reduce on the commercial airlines, like everything goes via our own network flight and our network flight is optimized. However, to meet the customer SKU levels and to meet the committed TAT and so on, the business call also is there to use the commercial to meet the committed level of service qualities like.

So your usage of commercial airline or let's say percentage of your cargo going through commercial airlines, that would variate in what range? So as of now, it will be the lowest, right, because now you have your aircrafts.

Yes.

A year before last year, it would be high because you would have been seeding some business, right?

Right, right.

So usually, what is that range of usage or percentage of commercial airlines in your total cargo?

So -- I mean -- well, I -- being -- I would say that it would effectively be like it was, say, between 20% to 25% of the total cost base, now it would be roughly between 10% to 11% of the cost base.

So 25% would be year before last year. And since your own airline has come now it is about 10%?

Yes.

Okay. My second question is between the 4% volume growth for FY '24 and the 9% volume growth for quarter 4, what are the specific comments for these changes? Because see, the sector is what it is. The macroeconomics is what it is, the activity is what it is in the system, yet there is a deviation from 4% to 9%. So it would be nice if you could explain this?

So see, we are comparing a year of '22, '23 and '23, '24. '22, '23 was still a COVID period. We were just out of the COVID, and we still had that COVID high during that period. We had some international charters during that period. So that was about '22, '23 and '23, '24 is the year of investment for Blue Dart, where we invested into 2 aircrafts and we had our -- we built up on our capacity, which is why if you look at it on a full year basis, it's just one point. But on the quarter basis, it is 8.7%, which indicates that how we have picked up eventually from a quarter-on-quarter to one of the best quarters so far at 8.7% like. I hope that overview helps.

No, ma'am, I still didn't understand between the full year number at 4% and the exit number at 9%, what changed in terms of cargo for you? See, because we correlate with the general macroeconomic trend, which has not changed throughout the year, so if there was a similar volume growth through the year, I would have understood. But having a stark contrast between full year and last quarter is what is I'm unable to understand?

See the full year of '22, '23, still had a COVID thing.

This is -- ma'am, this I'm asking for FY '24, right? For your full year FY '24, this current year, the volume growth is 4%.

Y-o-Y.

Yes, Y-o-Y. Full year '24 over full year '23 is 4%. However, quarter 4 '24 over quarter 4 '23 is 9%. So there is an acceleration, right, towards the end of the year. Why is it so, what is so unique?

Which is what -- so the -- in the year of '22, '23, it was still a COVID year. It was -- we still had a higher volumes on our air capacity and so on.

So you're saying that first 9 months there was adverse base.

Absolutely.

Quarter 4, there is no adverse base.

Yes.

Which means -- so which means the quarter 4 is a more normalized regular volume growth number, right? Because there is no adverse base, which can be -- which means that -- can I consider this as a volume growth number as a reference number? A more clear clean reference number without any base effects?

Yes, yes.

Okay. Okay. Understood. My other question is, with the shipping challenges that we are seeing, does it mean some benefits to the air cargo in the interim?

What shipping challenges are you talking about?

Internationally. Internationally.

Internationally shipping business, we do not have major impact, ours is purely domestic.

Yes. I understand it's domestic, but...

Maybe we expect some charters and so on, but so far, nothing, that's the expectation we could assume. But so far nothing we have seen into our P&L, at least into these quarters.

Okay. And on the document cargo, is there any increased competition or market share changes? Any that you experiencing?

Document through cargo -- Sagar, would you want to...

We don't see, as of now, any significant activity over the current or the last 1 year that we have seen.

Nothing? No change in the business structure or any -- no change in the competition levels or anything, right? No change in market shares for you?

Yes. No significant change in market share, yes.

Okay. And last -- my last question is, is it fair to assume that with the fleet utilization improving for FY '25, there should be a positive delta on the margins?

That's the expectation even from our side, like. And that's how even our budgets are based that in the upcoming months it's a hockey stick for us.

Okay. It's a hockey stick. At a 9% or what volume growth is exit volume growth? Those are sufficient enough for you to generate that positive delta or there is a median above which the -- median volume growth over which positive delta can be generated? Is it correlated? So the margin delta and volume growth, is it correlated 1:1 or there is a threshold volume growth beyond which only the delta will be created?

Sorry, I'm not able to get that question Pritesh.

Okay. I'll put it this way. Incrementally -- any incremental volume growth, any, means incremental margin expansion?

Yes.

So we'll take the next question from Mr. Jonas Bhutta from Birla Mutual Fund, please go ahead.