Buy VRL Logistics; target of Rs 350 : ICICI Securities

ICICI Securities's research report on VRL Logistics

VRL Logistics (VRL)’s Q2FY26 EBITDA was slightly ahead of Street’s estimate. Key points: 1) Realisation/te improved 12.8% YoY to INR 7,166, while EBITDA/te has improved to INR 1,548 (INR 1,216 in Q2FY25). 2) EBITDA margin has improved YoY; however, it dipped QoQ to 19% amid higher employee costs due to wage hike. 3) Volume slipped 10.7% YoY, mainly on account of: i) discontinuation of low-margin business; and ii) GST cut impact. 4) Incurred capex of INR 430mn in H1FY26; plans to incur INR 1.6bn in H2FY26. 5) Issued bonus share in 1:1 ratio in Aug’25. Management is guiding for: 1) 4–5% QoQ improvement in volumes in Q3 and 6–7% volume growth in Q4; and 2) EBITDA margins to sustain at current levels. Based on VRL’s H1 performance, we prune our FY26E/FY27E EPS and retain BUY with a revised TP of INR 350 (adjusted for 1:1; bonus issue earlier INR 355) on an unchanged multiple of 27x FY27E EPS.

Outlook

We estimate 2%/5% revenue growth for FY26E/FY27E with EBITDA margins in the range of 18–19%. Based on the H1FY26 performance, we reduce our EPS by 0.7%/1.5% for FY26E/FY27E. Maintain BUY with a revised TP of INR 350 (earlier INR 355) on an unchanged multiple of 27x FY27E EPS. We list VRL as our top pick among surface logistics players.