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ICICI Securities Report
VRL Logistics Ltd.'s Q2 FY23 result has undershot street estimates. Key takeaways:
volumes in goods transport segment rose 14% YoY and 7% QoQ;
consolidated Ebitda margin contracted due to increase in lorry charges and poor margin from bus segment on QoQ basis;
added 29 new branches in Q2 FY23 (H1 FY23: 97). Branches added in FY22 and H1 FY23 contributed ~8% of total tonnage in Q2 FY23; and
progress made in divesting non-core businesses.
Going forward, we see VRL Logistics reinvigorating its focus on goods transport business (and functioning as a pure-play goods transport company) that would further increase its profitability/returns.
Despite an underwhelming performance in Q2 FY23, we value VRL Logistics at 25 times FY24E earnings per share (one deviation above ten-year historical mean) as the company will now operate in better margin goods transport business.
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