VRL Logistics Ltd: Fast mover – Subscribe

VRL Logistics Ltd: Fast mover – Subscribe
Issue opens 15-Apr-15, Issue closes 17-Apr-15, Price band (Rs) 195-205

VRL Logistics Ltd is India’s leading surface logistics and parcel delivery company with one of the largest fleet size of ~4000 goods transport vehicle. VRL operates on a pan-India level through its 624 branches of which 48 act as strategic transshipment hubs. Integrated hub and spoke model has led to improved operational efficiency as it enables VRL to transport parcels of various sizes and provides multiple points of access to its clients for booking and delivery of goods. VRL also owns and operates 455 passenger buses across central and south India. Freight logistics contributes ~76% of total revenues while ~21% comes from passenger transportation segment. Wind power generation forms a small part of the company’s overall business contributing ~2% towards total revenues.

At the upper end of Rs195-205 price range, the stock is valued at 14.7x FY16E EPS of Rs13.9. Peers like Gati and Transport Corporation of India Trade in the range of 18x-25x. We note that apart from plain vanilla surface logistics, these peers also provide niche services like express delivery, ecommerce delivery and supply chain management and therefore trade at higher multiples. Nevertheless, with the improving macroeconomic environment, contribution of freight transportation via road is poised to increase and VRL with its largest fleet size, superior track record, strong brand name, diverse client base, and vast management experience is all set to benefit from the opportunities provide by the sector. Recommend investors to Subscribe.

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