Accumulate VRL Logistics; target of Rs 370: Prabhudas Lilladher
Prabhudas Lilladher’s research report on VRL Logistics
VRL 2QFY18 results were largely in line with estimates with revenue at Rs4.5bn (up 0.4% YoY), EBITDA margins at 12.3% vs. 11.1% YoY & PAT at Rs216m (up 55.8%YoY). Key highlight has been (i) In GT segment while environemnt was challenging & activity was sluggish due to post?GST chaos & protests (leading to 10% dip in volumes), 11% higher realisations helped post flattish revenues (ii) Steady performance in BT segment in seasonally lean quarter with 7% revenue growth (iii) Margin improvement of 127bps YoY was a combination of price hikes, lower cost due to sluggish volumes in GT segment & better uilisation of owned fleet leading to lower lorry hire charges. VRLL has announced buy?back of equity shares at the price not exceeding Rs460/share agggregating upto Rs414m via openmarket route and promoters won’t participate in the same.Though management didn’t comment on whether buy?back is in lieu of dividend, we believe this is an effcient way of paying back to share holders (and straight away saving on dividend distribution tax to the tune of ~Rs80m)
VRL commands premium valuations, with stock currently trading at 28.1x FY19E PER, considering it being one of the largest organised players with the largest base of drivers on rolls (~8000); Strong balance sheet & cash flow generation. We maintain our ‘Accumulate’ stance with target price of Rs370 (rolling it over to Sept?19 and valuing it at 25x Sept?19E PER.)
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