Buy VRL Logistics; target of Rs 660: Motilal Oswal

Motilal Oswal's research report on VRL Logistics

VRL Logistics (VRL)’s 1QFY25 revenue grew 8% YoY (-5% QoQ) to ~INR7.3b (in line). Volumes increased 7% YoY to 1.07m tons in 1QFY25. Volumes were hit by general elections and sluggish demand in the southern states. Realization per ton stood at INR 6,723 (flat YoY and QoQ). EBITDA margin stood at 11.9% vs. our estimate of 13.0%. The margin was adversely impacted YoY by an increase in operating expenses and staff costs. The election period caused a prolonged shortage of drivers and loading/unloading staff, affecting services and vehicle turnaround. A heatwave in the North also reduced efficiency. VRL hired temporary workers to maintain operations, which led to additional costs. EBITDA declined 15% YoY to INR869m (6% below our estimate of INR925m).

Outlook

We expect VRL to report an 11% volume CAGR over FY24-26, with faster addition of branches in the untapped regions. We anticipate VRL to deliver a revenue/EBITDA/PAT CAGR of 14%/18%/52% over FY24-26. We reiterate our BUY rating with a revised TP of INR660 (based on 28x FY26E EPS).