Multibagger stock: Ritco Logistics achieves 220% growth in 20 months, 2750% over 4 years. Is there more upside ahead?

Multibagger stock Ritco Logistics, engaged in transportation activities, has witnessed a remarkable surge in its share price over the recent months, consistently breaking record highs and achieving significant milestones. Notably, it has demonstrated a strong ability to recover quickly after any dips, often bouncing back with increased momentum, leading to substantial returns for its shareholders.

Over the past eight months, the company's shares have climbed from ₹189 to the current trading price of ₹400, representing a gain of 111%. Over the last 20 months, the stock has delivered even more impressive returns, rising from ₹125 to its current level, marking a gain of 220%. Over a four-year period, the stock has surged by an astonishing 2,750%.

The remarkable performance of Ritco Logistics' share price can be attributed to its strategic expansion into various sectors, including automobiles, FMCG, cement, solar, and steel. According to analysts, the company has successfully reduced its reliance on the petrochemical segment, lowering its revenue contribution from 59% in FY21 to 48% in FY24.

This shift is largely driven by its focus on the steel sector, which saw a significant increase in revenue contribution from 2% in FY21 to 19% in FY24. Ritco’s notable clients include Tata Steel, Jindal Steel & Power, ACC, Ambuja Cement, and Dalmia Bharat Limited.

The company started as a contract logistics provider, initially catering to a few businesses with a combination of owned and hired vehicles. It is now evolving into an integrated, tech-based supply chain solution provider. It operates through three main business verticals: contract logistics, fleet management, and 3PL logistics, positioning itself to deliver comprehensive logistics solutions.

Is stock poised for continued gains?

Domestic brokerage firm Monarch Networth Capital, in its latest note, has initiated coverage on Ritco Logistics with a 'buy' rating, setting a target price of ₹760 per share, implying an upside potential of 90%.

The brokerage is optimistic about Ritco’s growth prospects, citing its unique business model, increasing customer additions in its Full Truck Load (FTL) segment, entry into multimodal logistics, and contributions from its tech platform, TrucksUp.

TrucksUp, designed to tackle issues such as underutilisation and reverse loads for small fleet owners, offers services like GPS tracking, fuel cards, FASTag integration, and vehicle financing.

With 1.7 lakh downloads by August 2024 and projections to reach 8 lakh downloads by FY27, the platform is set to be a major growth driver. Monarch believes that TrucksUp could revolutionise the trucking industry by empowering operators and streamlining processes, making it a potential game-changer for both Ritco and the sector by FY26-27.

Ritco's asset-light model, manageable debt/equity ratio (expected at 0.5x by FY27), and strong relationships with marquee clients position it distinctly within a fragmented industry plagued by inefficient fleet management.

Monarch expects Ritco’s revenue and earnings to grow at an accelerated pace due to customer acquisitions in FTL, multimodal logistics expansion, and the rising contribution of TrucksUp. It anticipates ROE/ROCE to comfortably reach 20% levels by FY27E with further scope for improvement.

Despite expectation of robust financials, industry tailwinds, and operational triggers, Ritco is trading at a 40–50% discount to peers. Monarch expects this gap to narrow as the company delivers on the key points. Further, increased investor confidence in improved profitability, including scale up at TrucksUp, could result in valuation re-rating.

It valued Ritco at a 20x FY27 PE ratio (higher than its historical valuations but still at a discount to large peers) to arrive at a target price of ₹760/share.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.