Buy VRL Logistics; target of Rs 710: Motilal Oswal

Motilal Oswal's research report on VRL Logistics

VRL Logistics (VRL)’s revenue grew 2% YoY to ~INR7.4b (-8% QoQ), in line with our estimate. Volume dipped 13% YoY to 0.93m tonnes, while realization improved 17% YoY to INR7,852/tonne, driven by price hikes. Volume drop was mainly due to contract restructuring and the exit of certain low-margin customers. Though volumes declined due to this restructuring, EBITDA grew 74% YoY to INR1.5b with margins at 20.4% (vs. est. 21.3%), aided by better realizations, lower fuel costs, reduced lorry hire charges, and improved procurement efficiency (refinery sourcing at 41.5% vs. 33% YoY).

Outlook

We expect VRL to clock flat volumes and a revenue/EBITDA/PAT CAGR of 6%/10%/19% over FY25-27. Reiterate BUY with a revised TP of INR710 (based on 24x FY27 EPS).