“BUY” This Small Cap Logistic Stock For A Gain of +25%: Motilal Oswal

Motilal Oswal’s take on VRL Logistics Ltd

The brokerage has said in its research report that “We released our Logistics thematic report recently, wherein we highlighted that the Logistics sector is set to move towards formalization and there would be strong growth opportunities for some of the established players in this space. With a robust growth outlook, we expect a strong upside in the stock from current levels. The strong tailwinds for VRL would drive consistent growth in volumes and earnings over the next few years. The company would benefit from the uptick in economic activity, the general price hikes taken post 1QFY22, and easing fuel prices (on account of tax cuts). VRL is focusing on the high-margin LTL business (driven by the B2B segment) and expanding its network into newer markets.”

Motilal Oswal has claimed that “The company has seen capacity utilization moving towards pre-COVID levels in the last few months. 2Q saw ~35% YoY growth in volumes, driven by the buildup in festive season inventory and easing of transport restrictions. The volume momentum is expected to continue with the pickup in economic activity and normalization of transportation activity. Over the medium-to-long term, we expect growth to be driven by an uptick in the overall Logistics sector (driven by economic growth) and increasing formalization, leading to market share gains in organized players such as VRL.”

Buy VRL Logistics Ltd With A Target Price of Rs. 540

The brokerage has said that “With a demand pickup and branch additions in untapped regions, we expect VRL to clock 19% revenue CAGR over FY21-24E. With robust volumes and cost efficiency measures, VRL would be able to maintain its EBITDA margin profile at 14-15% over the next two years.”

Motilal Oswal stated in its research report that “We expect the company to clock a revenue/EBITDA/PAT CAGR of ~19%/19%/45% over FY21-24E. The stock trades at 30x FY24 EPS. We maintain our Buy rating, with revised TP of INR540/share (35x FY24E EPS).”

Disclaimer

The stock has been 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.