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Brokerage firm Motilal Oswal recently hosted the management of VRL Logistics (VRLL) to get an understanding of the current business scenario and its outlook in which the management sounded optimistic on VRLL’s growth prospects over the next couple of years, the brokerage said in a note.
The company has introduced an average speed system wherein greater payments are paid to drivers who maintain a higher average speed. This has helped in covering greater distances in a limited time. Volumes itself have increased, resulting in higher utilization levels and reduced turnaround times, the note highlighted.
The brokerage has maintained its Buy rating on the multibagger stock that has surged over 126% in a year’s period, with a revised target price of ₹540 per share.
Textile/Agriculture/Auto segment contributes 18-19%/8-9%/5-6% to revenue. Textile, Agricultural commodities, and Industrial components have seen an improved revenue contribution in the last one year.
“With a pickup in demand and branch additions in untapped regions, we expect VRL Logistics to clock 19% revenue CAGR (compound annual growth rate) over FY21-24E. With robust volumes and cost efficiency measures, VRLL would be able to maintain its EBITDA margin profile at 14-15% over the next two years,” Motilal Oswal’s note stated.
VRLL is looking to acquire warehouse space in Bengaluru for ₹1.7 billion. The same is pending due to document clearance and may take time to materialize. Capex would be between ₹1 billion and ₹1.5 billion in FY22. Internal accruals are enough to fund capex, as per the brokerage.
The management plans to open 100 branches in unexplored locations of North and Northeast India in FY22. Around 50-55 branches have already been opened, and the rest would be opened over the next 3-6 months.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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