Buy VRL Logistics; target of Rs 690 : Motilal Oswal

Motilal Oswal's research report on VRL Logistics

We attended VRLL’s investor call to get a sense of the recent developments and business outlook in the Logistics sector. The management touched upon various aspects like: a) volume movement in recent times, b) rising fuel prices, c) branch addition strategy, and d) market share shift towards organized players. Here are the key takeaways from that interaction: Business activity: Logistics activity has been pretty strong in 4QFY22. VRLL expects to end 4QFY22 with a growth on a YoY basis. Improved economic activity is also evident from the recent GST and e-way bill data. Shift towards the organized sector: After 1st Apr’22, e-invoicing will be mandatory for entities with a revenue of over INR200m (from INR500m earlier). There is a lot of pressure on small fleet operators due to compliance, technology, maintenance, billing, etc., leading to higher cost of operations. This will shift a lot of business towards the organized sector. In the current system, long haul transfers have turned to organized players, but intra-state transfers are still unorganized.

Outlook

We expect the company to clock a revenue/EBITDA/PAT CAGR of ~21%/26%/65% over FY21-24E. The stock trades at 19x FY24E EPS. We maintain our Buy rating, with a TP of INR690/share (30x FY24E EPS).