ICICI Securities has updated its price target for BlackBuck to Rs 675, citing strong growth in the telematics and core logistics segments. While the company's platform user base has expanded, investors are closely monitoring a dip in profit margins caused by a change in the revenue mix.
ICICI Securities has revised its target price for BlackBuck to Rs 675, reflecting growth in the company's core logistics and telematics business. This change follows strong performance metrics, though the company’s profit margins have faced some pressure due to evolving revenue streams.
BlackBuck's core business recorded growth of over 30% in the most recent quarter. A significant driver of this performance has been the telematics division, which reported a year-over-year increase of more than 50%. This growth is partly supported by mandatory government requirements under the Automotive Industry Standards (AIS), which have encouraged more fleet operators to adopt the company's subscription-based services.
Platform engagement also showed progress, with Monthly Transacting Users (MTUs) rising 13% to 895,000. Additionally, the number of customers using two or more services on the platform increased by 19%, suggesting that the company is successfully cross-selling its solutions.
However, there is a specific financial nuance for investors to consider regarding profit margins. While the company's 'Superloads' business—which uses AI-driven tools to increase productivity—grew significantly, it operates on thinner margins compared to other services. This shift in the mix of revenue towards higher-growth but lower-margin offerings resulted in a 500-basis-point (5%) compression in adjusted operating profit margins. Evaluating this balance between rapid expansion in newer segments and overall profitability remains a key point for shareholders.
Looking at the future, the company’s management does not expect significant operational disruption from potential changes in Merchant Discount Rates for UPI transactions. Furthermore, the company has set a goal for its vehicle finance division to reach an operating break-even point by the 2027 fiscal year.
Going forward, investors may track the trajectory of profit margins, particularly whether the company can improve profitability as the newer high-growth business lines mature. The execution timeline for the vehicle finance division’s break-even target will also be a factor to monitor in the coming quarters.