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Shares of VRL Logistics have given multibagger return in 2021 as the stock has surged over 124% this year (year-to-date or YTD) so far. Domestic brokerage and research firm Motilal Oswal sees further upside on the multibagger stock as it expects volume growth to drive the logistics company's earnings.

VRL is focusing on the high-margin LTL business (driven by the B2B segment) and expanding its network into newer markets, the note stated. The brokerage's buy recommendation on the stock comes with a target price of 540 per share. 

“With a demand pickup and branch additions in untapped regions, we expect VRL to clock 19% revenue CAGR over FY21–24E. With robust volumes and cost efficiency measures, VRL would be able to maintain its EBITDA margin profile at 14–15% over the next two years," stated Motilal Oswal's report.

The strong tailwinds for VRL would drive consistent growth in volumes and earnings over the next few years, as per the brokerage. The company would benefit from the uptick in economic activity, the general price hikes taken post 1QFY22, and easing fuel prices (on account of tax cuts), it said.

With improved demand, VRL looks to add 100 vehicles per quarter in 2HFY22. The company is also adding new branches to capture higher volumes. It looks to add 100 branches over the remaining months of FY22.

“The volume momentum is expected to continue with the pickup in economic activity and normalization of transportation activity. Over the medium-to-long term, we expect growth to be driven by an uptick in the overall Logistics sector (driven by economic growth) and increasing formalization, leading to market share gains in organized players such as VRL," added brokerage house Motilal Oswal.

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

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