Motilal Oswal Suggests To Buy This Logistics Stock For 33% Upside, In 1 Year

Reputed brokerage firm Motilal Oswal suggests buying the stock of VRL Logistics for a 33% upside. GST ecosystem in India and e-way bill reforms are benefitting the organized large players like VRL, and the company's customer base grew to ~0.25m from 50,000 since the GST rollout.

Target Price

The Current Market Price (CMP) of VRL Logistics is Rs. 435. Motilal Oswal has estimated a Target Price for the stock at Rs. 580. The company is expected to offer a 33% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 435
Target Price	Rs. 580
1 year return	33.00%

Company performance

VRL Logistics (VRL) is an established logistics operator primarily focusing on the high-margin LTL segment (90% contribution from LTL and 10% from FTL in FY21). VRL is one of the largest asset owners in the industry and is well placed to capitalize on the growth opportunity presented by the logistics sector. With robust volumes, expanding branch network, and improved cost efficiency measures, we expect VRL to clock a revenue/EBITDA/PAT CAGR of ~19%/22%/56%, respectively, over FY21-24.

Comments by Motilal Oswal

Motilal Oswal stated, "VRL derived ~90% of its business from the Goods Transport (GT) segment, followed by 7% contribution from the Passenger Bus Service segment in FY21. Unlike its peers, VRL operated its own fleet of 4,687 trucks (capacity: 69,011t) and 280 buses at end-2QFY22. We reiterate our BUY rating on the stock premised on 30x FY24E EPS, implying 33% potential upside. With demand improvement and branch additions in untapped regions, we forecast VRL to clock 19% revenue CAGR during FY21-24." However, sharp increase in fuel prices impact profitability, and transport-related restriction due to Covid remains as risk factors.

About the company

Founded in 1976, VRL has grown into a nationally renowned logistics and transport company which is also currently the largest fleet owner of commercial vehicles in India with a fleet of 4866 Vehicles (Including 291 Passenger Transport Vehicles & 4575 Goods Transport Vehicles amongst others). VRL finds mention in the Limca Book of Record as the largest fleet owner of commercial vehicles in India in the Private Sector. They operate through a network of 875 Branch and franchisees. VRL offers services across 22 States and, 4 Union Territories.

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Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.