Vrl logistics stocks: Fundamental Radar: This smallcap logistics player can hit fresh record highs; rally up to 40% in 1 year

VRL Logistics, part of the logistics solution provider, could well surpass Rs 800 levels to hit fresh record highs amid a pick-up in logistics activity, robust industry outlook, improved margins, and growth in revenues as well as profitability.

VRL, part of the S&P BSE Smallcap index, hit a fresh record high of Rs 719 on July 20, 2022 but failed to hold on to the momentum. The stock found support above the Rs 550 level.

The stock has largely remained rangebound in the recent past but improving fundamentals could add momentum to the stock.

Long-term investors can look at buying the stock now or on dip for a possible target above Rs 860 levels in the next one year which translates into an upside of nearly 40% from Rs 615 recorded on November 9, suggest experts.

Logistics activity picked up well in 2QFY23, with e-way bill generations for September jumping to a record high of over 84 million.

Further, the freight rates were stable in the last few months led by robust end-use demand. Even the diesel prices have been steady post-price cut in May 2022.

“With robust industry outlook and aggressive branch addition, VRL is on track to clock 18% volume growth in Goods Transport (GT) segment over FY22-24,” Sneha , AVP, Fundamental Research, , said.

“It is our top pick in the logistics space given its strong presence in the Less-Than-Truck-Load (LTL) segment,” she said.

VRL recently announced the slump sale of its bus division to a promoter group entity. This is positive as the management will now be able to better focus on the high-growth GT business.

“The proceeds will be used to partially fund truck fleet additions. EBITDA margins could improve in FY24 as the bus segment was generating lower margins and was a drag on overall profitability,” she added.

“We expect VRL to clock a revenue/EBITDA/PAT CAGR of ~14%/17%/30% over FY22-24. The stock trades at 21x FY24E EPS. We have a Buy rating with a TP of Rs 860 (28x FY24E EPS),” said Poddar.

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