Home / Markets / Commodities /  Motilal Oswal suggests this logistics stock to buy, sees upto 39% rally

Domestic brokerage and research firm Motilal Oswal believes the sale of the bus segment and the recent price increase in the goods segment are positive for VRL. The brokerage house expects VRL Logistics to clock a 21% volume compound annual growth rate (CAGR) over FY22-24 in the goods business, with faster branch additions in untapped regions. 

“We expect a revenue/EBITDA/PAT CAGR of 15%/13%/20% over FY22-24," the note stated. The brokerage house has maintained its Buy rating on VRL Logistics shares with a target price of 730 apiece.

VRL Logistics continues to focus on aggressive branch expansion in under-penetrated areas to garner more volume. For FY23, VRL is on track to add 150 branches and targets >20% volume growth. Almost half of the 20% volume growth is expected to come from the new branches opened in FY22 and FY23, it said.

VRL Logistics has now become a pure play goods transporter in the less-than-truck-load (LTL) segment after the bus business sale. The LTL segment is a fast-growing business with strong entry barriers.

“VRL would receive 1.9 bn (net of tax) of fund inflows from the sale, which it plans to use to partial fund its capex requirement of the goods business. With these funds and strong operating cash flows, VRL would be almost debt free at FY24-end despite completing the 5.6 bn capex plan," it added.

The volume growth post 2Q remains robust despite the positive impact of festive season demand receding. The robust activity level is also evident from the sharp improvement in e-way bill generation for Nov’22 (+ 8% MoM growth). VRL is seeing a strong shift from the unorganized segment toward the organized segment, Motilal Oswal added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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