Ashish Kacholia portfolio: Motilal Oswal sees over 30% upside on this logistics stock

VRL Logistics reecently announced the sale of its Bus division for ₹2.3 b to Vijayanand Travels Pvt (VTPL), an entity owned by the promoter group. The slump sale is being undertaken on the basis of an independent valuation obtained from Grant Thornton Bharat and has been executed at an arms-length basis. The transaction is subject to the receipt of requisite approvals.

The Bus segment has been struggling with low capacity utilization, lesser margin, an ageing fleet, and excessive competition from the Railways and regional Airlines with an increase in new routes and capacities. Due to the above-mentioned concerns and a weakening outlook, the management has decided to exit this business.

“Sale of the Bus segment is a positive for VRL Logistics as the management will be able to better focus on the high growth Goods Transport business. The proceeds accruing to VRL Logistics will be used to partially fund truck fleet additions. It may take on lower debt than that estimated earlier. EBITDA margin can be better in FY24 than that expected earlier as the Bus segment was generating lower margin and was a drag on overall profitability,” Motilal Oswal said in a note.

The brokerage house has revised its FY24 EPS estimate upwards by 8% to incorporate improved profitability, with a better EBITDA margin and lower debt in FY24 for the company.

“We now expect VRLL to clock a revenue/EBITDA/PAT CAGR of ~14%/17%/30% over FY22-24. The stock trades at 21x FY24E EPS,” the note stated. Motilal Oswal has maintained its Buy rating on VRL Logistics shares, with a revised target price of ₹860, implying over 30% upside potential from the current stock level.

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 48% in 2022 (YTD) so far whereas it has surged more than 88% in a year's period.

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