Motilal Oswal recently hosted the management of VRL Logistics (VRLL) to gain knowledge of the present business climate and its prognosis. According to the brokerage, the management sounded confident about VRLL’s development possibilities over the next couple of years.
The company has implemented an average speed system in which drivers who maintain a higher average speed receive larger rewards. This has helped in travelling long distances in a short amount of time. According to the memo, the volume has increased, leading to better utilisation and reduced turnaround times.
With a revised target price of Rs. 540 per share, the brokerage has maintained its Buy recommendation on the multibagger stock, which has risen over 126% in a year.
The textile category accounts for 18-19%, the agriculture category for 89%, and the auto category for 56% of the total income. In recent years, income contributions from textiles, agricultural commodities, and industrial components have increased.
Motilal Oswal’s note mentioned that they estimate VRL Logistics to post a 19% revenue compound annual growth rate (CAGR) over FY 2021-2024. It is because of the recovery in demand and branch openings in underserved areas.
They also said that VRLL would be able to sustain its earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin profile at 14-15% for the next two years with strong columns and cost-cutting measures.
VRLL is trying to buy Rs. 1.7 bn. worth of warehouse property in Bengaluru. Due to paperwork clearance, it is pending and may take some time to materialise. In FY 2022, CAPEX is expected to be between $ 1 bn. and $ 1.5 bn. According to the brokerage, internal accruals are sufficient to cover CAPEX.
In FY 2022, the management intends to establish 100 branches in underserved areas in North and Northeast India. Around 50-55 branches have already been opened, with the other branches to follow in the following 3-6 mths.
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