Buy VRL Logistics; target of Rs 655: ICICI Securities

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26 Aug, 2025 12:21

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ICICI Securitie's research report on VRL Logistics

VRL’s Q1FY25 EBITDA of INR 869mn missed our and street estimates. Key points: 1) Volume rose 6.8% YoY (down 5.3% QoQ) to 1,170kte (I-Sec estimate: 1,192te); 2) EBITDA/te declined QoQ to INR 812 (INR 1,017 in Q1FY24 and INR 932 in Q4FY24); 3) EBITDA margin declined QoQ to 11.9% (Q1FY24: 15.1%, Q4FY24: 13.7%); 5) VRL added 36 (net addition) new branches which accounted for 3.55% of total tonnage in Q1FY25; 6) GT carrying capacity increased to 88,198te (86,405te in Q4FY24end); 7) GT vehicles increased to 6,177 in Q1FY25 from 5,994 at FY24-end; and 8) company incurred capex of INR 496.3mn in Q1. Going ahead, management expects close to double-digit volume growth and improvement in EBITDA margin led by price hike in FY25.

Outlook

VRL Logistics’ (VRL) Q1FY25 EBITDA was 14.4% and 17.5% below our and consensus estimates, respectively. Key points: 1) Shipments rose 6.8% YoY (below expected) on manpower unavailability; 2) EBITDA margin declined QoQ to 11.9% (Q4FY24: 13.7%) due to higher unabsorbed operating cost; 3) 36 new branches were added and contributed 3.55% of overall volume; and 4) Q1 capex stood at INR 496.3mn. For FY25, management has guided for i) nearly double-digit volume growth; ii) 100+ branch addition, and iii) quarterly capex of INR 450-500mn. Taking cognisance of management’s commentary and Q1FY25 performance, we have lowered our volume growth estimates by 150-200bps for FY25/26E. Our FY25/26E EPS has been pruned by 20%/15%. Maintain BUY with a revised TP of INR 655 (earlier INR 770) based on 27x FY26E EPS. We continue to recommend VRL as one of our preferred picks in logistics space as the worst seems to be over for the company.

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