Brokerage and research firm Elara Capital remains confident on the growth prospects of VRL Logistics’ core business and expects FY22-24E revenue and earnings compounded annual growth rate (CAGR) of around 20%.
Brokerage house reiterates buy tag VRL Logistics Share with a revised target price of 780 per piece (from 813), adjusted for the absence of a bus segment.
The proposed transaction focuses on the core competency of the GT segment and will improve the cash flow, profitability and return ratio of VRL Logistics. With this transaction, VRL Logistics has divested most of its non-core business, including the recent sale of wind power and air charter operations, the note said.
“We believe bus segment sales are positive as lower margins and capacity utilization in bus operations would have dragged down the consolidated performance, negative ROCE of bus segment at FY12, ROCE of 27% for GT segment. And the old bus fleet (65% of the fleet above nine years) will require capital expenditure support in the near term for replacement,” Elara said.
Following the sale of the bus business, Management Bandwidth will focus on growing the Goods Transportation (GT) segment only, adding 1,600 gross new trucks (at an investment of Rs. 5.6 bn), 90-100 new branches and new customers in FY23, the note highlighted.
Presently, the promoter holds 70% stake in the company and wants to reduce 5% simply to raise funds to buy the business. 2.3 billion in its entity, Ms. Vijayananda Travels. The decision was taken as disposal of old vehicles was not possible due to lack of demand from the existing operators involved in passenger transport service. In addition, the threat from railways and regional airlines challenged the growth, the brokerage said.
As per the recent shareholding pattern on BSE, Indian veteran investors and stock market traders Ashish Kacholia Holds 1.37% equity or 12,07,632 shares in the company as on June, 2022. VRL Logistics is a leading transport and logistics company in India. The stock is up 38% so far in 2022 (YTD), while it has gained more than 60% in a span of one year.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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