Home / Markets / Stock Markets /  Ashish Kacholia portfolio: Brokerage bullish on this logistics stock, revises target price

Brokerage and research firm Elara Capital remains confident on the growth prospects of the core business of VRL Logistics and expect FY22-24E revenue and earnings compound annual growth rate (CAGR) of around 20% each. 

The brokerage house has reiterated Buy tag on VRL Logistics shares with a revised target price of 780 apiece (from 813), adjusted for the absence of the bus segment.

The proposed transaction strengthens focus on the GT segment’s core competency and will improve VRL Logistics’ cash inflow, profitability and return ratios. With this transaction, VRL Logistics will have divested a majority of the non-core business, including the recent sale of wind power and air charter operations, the note stated.

“We believe the sale of the bus segment is positive as lower margins and capacity utilization in bus operations would have dragged consolidated performance, the bus segment’s negative ROCE of 3%, as on FY22, is lower than GT segment’s ROCE of +27% and ageing bus fleet (65% of fleet above nine years) would need capex support in the near term for replacement," Elara said.

Post the sale of the bus business, the management bandwidth would focus only on growing the Goods Transportation (GT) segment, amid strong demand push by adding 1,600 gross new trucks (at an investment of 5.6 bn), 90-100 new branches in FY23 and new clients, the note highlighted.

Currently, the promoter has a 70% stake in the company and is looking to dilute 5% to raise funds to purchase the bus business for 2.3 bn in its own entity, M.s Vijayanand Travels. This decision was taken as the disposal of older vehicles was not possible due to lack of demand from existing operators involved in passenger transportation service. Also, the threat from railways and regional airlines challenged growth, the brokerage added.

As per the recent shareholding pattern on the BSE, Indian ace investor and stock market trader Ashish Kacholia has 1.37% equity or 12,07,632 shares in the company as of June, 2022. VRL Logistics is a leading tranportation and logistics company in India. The stock is up 38% in 2022 (YTD) so far whereas it has surged more than 60% in a year's period.

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

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