Company: VRL Logistics
CMP: 469
Market Cap: 4100 cr
Revenue (Q3FY25 TTM): 3120cr
EBITDA margin: 16%
5 year average ROE: 19%
Net debt of 460cr
P/E: 31x
- Company is a B2B part-truck load business; Industry is roughly around $9bn but is very fragmented and is mostly into unorganised segment; very few large players with PAN India presence
- Two key drivers for revenue is Volume & Pricing
- Company has fleet of 6100 own trucks & is aggressively adding more trucks; it’s the only company in Industry which has such a large fleet of own trucks; rest all operate on lease model + company has branch network of 1248 branches PAN India, on an average company is looking to add 70-80 branches annually. Both these initiatives will lead to volume growth of 8-10%, slightly above the GDP growth rate as they are gaining market share through systemic shift from unorganised to organised segment
- On pricing front, due to high competitive intensity, Industry was not able to do price hikes, however in Jun’24 company has announced price hikes; this will help hem in operating leverage
- Other than above, Company is doing lot of operational efficiency steps like buying fuel in bulk, route optimization, focussing on hub to spoke vehicle utilization, control on hired vehicles, etc – which would lead to further efficiency
- Company has guided for 12-13% revenue growth with 18% EBITDA margins – together this will lead to 28-30% growth on EBITDA & even larger growth in PAT. Additional as company’s major focus is on MSME, if economy revive on account of government initiatives (like Income tax cuts, GST cuts, etc), company could even perform better
- Company currently has nert debt of 460 cr. Company annual cash flow from operations was around 425cr in FY24, post which company has announced price hikes, so hereon company annual cashflow would be around 600cr, hence company is in very comfortable position to repay debt + spend 160cr on acquisition of new trucks in FY26
- Company working capital cycle is 9 days which is the lowest in the industry, average ROCE is in range of 15-20%
- Company’s last 10year / 5 year / 3 year average P/E is 34x / 36x / 37x against its current P/E of 31x
If company is able to do 8-10% volume growth (on account of economy revival or its branch / truck expansion initiatives), due to operating leverage, it would have high PAT growth and market would take it positively.
Thread link: VRL Logistics - value unlocking due to promoter actions
Q3FY25 call transcript: https://www.bseindia.com/xml-data/corpfiling/AttachHis/5e0c2153-99e0-499d-9911-f27d7212f937.pdf
Q3FY25 presentation: https://www.bseindia.com/xml-data/corpfiling/AttachHis/a5fcd97b-aa26-4337-8fec-ed1d80b9ad62.pdf