Prabhudas Lilladher recommended accumulate rating on VRL Logistics with a target price of Rs 438 in its research report dated May 28, 2018.
Prabhudas Lilladher's research report on VRL Logistics
VRL 4QFY18 results were marginally below estimates with revenue at Rs4.9bn (up 10.5% YoY), EBITDA margins at 9.1% (lower 35bps YoY) & PAT at Rs120m (up 16%YoY). Key highlights have been (i) In GT segment traction is improving as GST disruptions are subsiding, visible in 7% & 4% volume & realisation growth YoY respectively in Q4. (ii) BT segment witnessed 5% growth in pasengers carried & realisations each YoY in Q4. However no plan of fleet addition in BT segment till the competitive & regulatory scenario improves (iii) With revision of freight rates in May and proposed revision in June, they intend to pass on most part of fuel inflation. Management looked confident of passing on the cost in future as well though with some lag.
Outlook
VRL commands premium valuations, with stock currently trading at 27.7x FY19E & 21.6x FY20E PER, considering it being the key beneficiary of GST, one of the largest organised players with the largest base of drivers on rolls, Strong balance sheet & cash flow generation. Fleet expansion by 1200 trucks will further strengthen its position; however, it will hurt the margin expansion & return ratios in the short run. We maintain our 'Accumulate' stance with target price of Rs438 (valuing it at 25x FY20E PER.)
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