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Kotak Securities
VRL Logistics (Buy)
CMP: ₹430
Target: ₹500
VRL Logistics Ltd is engaged in goods transportation and passenger transportation. The Company offers logistics services dealing in domestic transportation of goods. It is also engaged in bus operations, air chartering service, sale of power and sale of certified emission reductions (CER) units generated from operation of wind mills.
VRL Logistics has reported a very strong H1FY18 and we expect the trend to continue in future quarters as well. We estimate volume trend to improve for VRL in the logistics segment with shift of volumes from the unorganised segment post GST implementation.
While the bus segment is set to expand and grow under the Amended Motor Vehicle Act, outlook also remains strong with factors such as: 1) Government initiatives to improve road infra; 2) Effective management of fuel cost; 3) Effective internal control systems; 4) A strong Management team; and 5) Healthy estimated GDP growth.
We are introducing FY20 numbers and maintain ‘buy’ with an increased target price ₹500 (from ₹450) valued at 25x FY20E earnings.
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