Buy VRL Logistics; target of Rs 350: Motilal Oswal

Motilal Oswal's research report on VRL Logistics

VRL Logistics’ (VRLL) management implemented a price hike of 8-10% in Jun’24, which was rolled out across customer segments. The impact of the hike was still visible in 1QFY26, with volume dipping 13% YoY to 0.93m tons, while realization improved 17% YoY to INR7,852/tons. Though volumes declined due to this restructuring, EBITDA grew 74% YoY to INR1.5b, with margins at 20.4%, aided by better realizations, lower fuel costs, reduced lorry hire charges, and improved procurement efficiency (refinery sourcing at 41.5% vs. 33% YoY). Realizations are expected to remain stable, and no more pricing action is planned unless cost dynamics shift. FY26 volume growth is likely to remain flattish YoY, but FY27 is poised for 7-8% growth.

Outlook

We expect VRLL to clock flat volumes and a revenue/EBITDA/PAT CAGR of 6%/10%/19% over FY25- 27. Reiterate BUY with a TP of INR350 (based on 24x FY27 EPS).

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