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COVID-19 dampens the growth, situation improves in July VRL Logistics (VRLL) reported a weak topline in Q1FY21, as the
lockdowns and other headwinds put pressure on both goods and bus segments. Improvement seen in July on operational front.
Management highlighted the following: (1) Targets nominal profit in FY21E, PAT positive in July (2) No major capex for FY21 (3) Price hikes taken to offset volume fall. (3) Focus on client addition (4) Cost control measures taken like pay cuts (5) Improvement in availability of workers and drivers (6) Asked for rent waiver for April month (7) Utilisation to has improved from July onwards (8) Commodities like agri, food grains, pharma saw an uptake in volumes while textile witnessed a decline (9) Geographic wise bookings mix have not changed much- South largest with 40%. North and West seen growth.
We revised our FY21 estimates to nominal profit as indicated by the company vs our estimate of losses earlier. Expect recovery from H2FY21E with improvement in business segments. We maintain our fair value target to Rs 175 at 16x FY22 EPS and maintain Accumulate rating.
Bus segment reports miniscule revenues, Sharp fall in operating profit VRLL's Q1FY21 revenue growth declined 70% YoY, driven by Passenger segment degrowth of ~-95% YoY while Goods segment fell 65% YoY. Air charter segment too fell 79% YoY during the quarter. Goods segment witnessed 5% realization growth offset by sharp tonnage decline. No major bus movement during marriage season and vacation in schools resulted complete loss of revenues while closure of branches and scarcity in drivers and labors impacted the GT Segment. EBITDA reported the losses of Rs 339mn. Margins at -21% vs 16.5% YoY/11.4% QoQ. GT segment EBITDA stood at Rs 341mn loss, down while Bus segment/Air charter EBITDA too reported loss of Rs 23mn/Rs 11mn respectively. However, power sale reported Rs 34mn profit. Overall cost declined by 57% YoY/56% QoQ. Employee cost declined by 28% YoY/-30% QoQ on the back of salary cuts taken by middle and senior level employees. PAT reported a loss of Rs 627mn vs Rs 275mn profit YoY. Overall the company reduced 46 vehicles in Q1 vs 229 addition in Q4FY20. No major capex expected this year.
Q1FY21 Result (Rs Mn)
Particulars Q1FY21 Q1FY20 YoY (%) Q4FY20 QoQ (%)
Revenue 1,601 5,396 (70.3) 4,978 (67.8) Total Expense 1,940 4,508 (57.0) 4,412 (56.0)
EBITDA (339) 888 NM 566 NM
Depreciation 419 400 4.7 453 (7.5)
EBIT (757) 488 NM 113 NM
Other Income 23 24 (3.4) 24 (4.9)
Interest 104 88 18.1 105 (1.2)
EBT (838) 424 NM 33 NM
Tax (211) 150 NM 11 NM
RPAT (627) 275 NM 21 NM
APAT (627) 275 NM 21 NM
(bps) (bps) Gross Margin (%) 22.3 35.3 (1301) 31.9 (966)
EBITDA Margin (%) (21.2) 16.5 NM 11.4 NM
NPM (%) (39.2) 5.1 NM 0.4 NM
Tax Rate (%) 25.2 35.3 NM 34.7 NM
EBIT Margin (%) (47.3) 9.0 NM 2.3 NM
CMP Rs 151
Target / Upside Rs 175 / 16%
BSE Sensex 38,087
NSE Nifty 11,178
Scrip Details
Equity / FV Rs 903mn / Rs 10
Market Cap Rs 14bn
US$ 183mn
52-week High/Low Rs 302/Rs 130
Avg. Volume (no) 1,19,876
NSE Symbol VRLLOG
Bloomberg Code VRLL IN
Shareholding Pattern Jun'20(%)
Promoters 68.1
MF/Banks/FIs 20.3
FIIs 5.5
Public / Others 6.1
Valuation (x)
FY20A FY21E FY22E
P/E 15.2 NM 13.6
EV/EBITDA 5.2 7.3 3.7
ROE (%) 14.3 0.1 15.9
RoACE (%) 14.8 4.3 15.8
Estimates (Rs mn)
FY20A FY21E FY22E
Revenue 21,185 16,417 20,937
EBITDA 2,983 1,923 3,365
PAT 901 7 1,006
EPS (Rs.) 10.0 0.1 11.1
VP Research: Vinod Chari Tel: +91 22 40969776
E-mail: [email protected]
Associate: Nishant Shah Tel: +9122 409697758
VRL Logistics
Accumulate
August 17, 2020
August 17, 2020 2
Actual V/s DART estimates
(Rs mn) Actual Estimated % Variance Consensus % Variance Remarks
Net sales 1,601 1,513 5.8 2,072 (22.7) Passenger/Goods Transport segment declined by ~-95%/65% YoY.
EBITDA (339) (496) (31.7) (410) (17.4) Higher revenue and contained cost drove better than expected EBITDA
EBITDA Margin (%) (21.2) (32.8) 1161bps (19.8) (137bps)
PAT (627) (767) (18.3) (791) (20.7) Improvement in operating profit drove PAT higher
EPS (6.9) (8.5) (18.3) (8.8) (20.7)
Source: Company, DART
Maintain Accumulate We revised our FY21 estimates to nominal profit as indicated by the company vs our estimate of losses earlier. This is on the back of improvement in utilisation and opening of economy despite having relatively higher fix cost during lockdown. Expect recovery from H2FY21E with improvement in business segments. We maintain target of Rs 175 at 16x FY22 EPS and maintain Accumulate rating.
Change in estimates
Key Parameters FY21E FY22E
Old New % Chg Old New % Chg
Revenue (Rs m) 16,150 16,417 1.7 20,850 20,937 0.4 EBITDA (Rs m) 1,826 1,923 5.3 3,377 3,365 (0.4) EBITDA margin (%) 11.3 11.7 41bps 16.2 16.1 -13bps Net profit (Rs m) (126) 7 NM 986 1,006 2.1 EPS (Rs) (1.4) 0.1 NM 10.9 11.1 2.1
Source: Company, DART
Key Assumptions in our estimates
FY18 FY19 FY20E FY21E FY22E
Goods transport 15,172 16,860 17,247 13,569 17,555 % growth 6.4 11.1 2.3 (21.3) 29.4 Bus operations 3,587 3,803 3,437 2,356 2,805 % growth 10.0 6.0 (9.6) (31.5) 19.1 Sale of power 217 221 186 144 194 % growth (7.4) 1.7 (15.6) (23.0) 35.0 Air chartering service 131 107 198 248 273 % growth (18.1) (18.3) 84.9 25.0 10.0 Un-allocable revenue 115 104 117 100 111 % growth 2.8 (10.0) 12.3 (14.0) 11.0 Total 19,223 21,095 21,185 16,417 20,937 % growth 6.6 9.7 0.4 (22.5) 27.5
Source: DART, Company
August 17, 2020 3
Topline falls 70%, Bottomline and EBITDA reports losses VRLL's Q1FY21 revenue growth declined 70% YoY, driven by Passenger segment degrowth of ~-95% YoY while Goods segment fell 65% YoY. Air charter segment too fell 79% YoY during the quarter. Goods segment witnessed 5% realization growth offset by sharp tonnage decline. No major bus movement during marriage season and vacation in schools resulted complete loss of revenues while closure of branches and scarcity in Drivers and labour impacted the GT Segment. EBITDA reported the losses of Rs 339mn. Margins at -21% vs 16.5% YoY/11.4% QoQ. GT segment EBITDA stood at Rs 341mn loss, down while Bus segment/Air charter EBITDA too reported loss of Rs 23mn/Rs 11mn respectively. However, power sale reported Rs 34mn profit. Overall cost declined by 57% YoY/56% QoQ. Employee cost declined by 28% YoY/-30% QoQ on the back of salary cuts taken by middle and senior level employees. Rent waiver of Rs 40mn during Q1. PAT reported a loss of Rs 627mn vs Rs 275mn profit YoY. Overall the company reduced 46 vehicles in Q1 vs 229 addition in Q4FY20.
GT realization up 5%YoY; Focus on client and new routes addition In Q1FY21, GT segment revenue declined 65% YoY/QOQ, driven by sharp decline in volumes offset by 5% YoY growth in realisation. The company saw the improvement in utilization. May saw 25-30% utilization which improved to 60-65% in June and 70-75% in July. During the quarter, the company faced the problem of scarcity in drivers and labour for material handling. Many drives deserted their post in order to reach to their native villages. Some were stopped by the authorities and were quarantined while some were stranded. The situation has improved from July onwards. The company has taken price hikes in order to mitigate overhead cost and offset the very low volumes. It continued to focus on client and new routes addition. It gained 6-8% market shares due to client addition. Overall volume volatility was higher in metro cities like Mumbai, Kolkata, Chennai where volumes were lower while improvement was seen in Delhi. Volumes from Karnataka were impacted due to lockdown. The company may evaluate the secondary trucks if they fit into their criteria. It is also saw volumes marginally tilting towards FTL vs LTL. Mix stood at 10:90%. MSME business is improving. It contributes ~35-40% of the business. Passenger segment: The lockdown impacted the segment hard with sharp fall of 95% YoY as none of passenger buses were operational during its busy season of marriage and vacation in schools resulting into resulting complete loss of revenues. Buses have resumed with numerous restriction. Utilisation has been improving but currently at 25-30% and may not foresee going above 40% in near term. The company may reduce the buses in near term. The segment reported the EBITDA loss of Rs 23mn vs profit of Rs205mn YoY/Rs65mn QoQ.
Other highlights (1) Total vehicle addition decline by 46 to 4708 vs 4754 QoQ. No change in bus segment but may come down in coming future. Overall vehicles stood at 5045 vs 4841 YoY/5091 QoQ (2) Procurement of Bio-fuel @ 31.03% of total quantity in Q1FY21 vs 31.42% YoY/18.37% QoQ. (3) ICRA Debt Rating is maintained A+ (stable). (4) Net debt stood at Rs 1.89Bn vs Rs 1.77Bn in FY20. (4) No capex for FY21(5) working capital limits are under strain and have approached the lenders for increase of these limits to which an in-principle consent has been provided by the Banks. (6) Cost cutting measures: (a) More focus on bio-diesel usage. (b) Pay cut by the middle and senior level employees, Salary cuts will result saving of Rs 10mn/ month. (c) change in maintenance schedule of GT vehicles will result some cost benefit. (7) Cloth remains the major commodity forming 12% now vs 15-16% in pre-COVID era followed by Agri (12% vs 3% pre covid) Foodgrains (12% vs 8%), Pharma products (7-8% vs 4-5% earlier). Pesticides (3%), and Machinery (6%) too reported the growth.
August 17, 2020 4
Result Snapshot
(Rs mn) 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 YoY (%) QoQ(%)
Net sales 5,396 5,238 5,573 4,978 1,601 (70.3) (67.8)
Expenditure 4,508 4,507 4,776 4,412 1,940 (57.0) (56.0)
Operating Expense 3,492 3,484 3,739 3,388 1,244 (64.4) (63.3)
Employees Cost 925 950 973 957 666 (28.0) (30.4)
Other Expenses 92 72 64 67 29 (67.9) (55.9)
Operating profit 888 732 797 566 (339) NM NM
Other income 24 31 24 24 23 (3.4) (4.9)
Interest 88 88 86 105 104 18.1 (1.2)
Depreciation 400 415 408 453 419 4.7 (7.5)
PBT 424 260 326 33 (838) NM NM
Tax 150 -87 68 11 (211) NM NM
PAT 275 347 258 21 (627) NM NM
EPS (Rs) 3.0 3.8 2.9 0.2 (6.9) NM NM
Source: Company, DART
As a % of Sales
% of Sales 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 YoY (%) QoQ(%)
Operating Expense 64.7 66.5 67.1 68.1 77.7 1301bps 966bps Employees Cost 17.1 18.1 17.5 19.2 41.6 2446bps 2237bps Other Expenses 1.7 1.4 1.2 1.3 1.8 14bps 50bps EBITDA Margins( %) 16.5 14.0 14.3 11.4 (21.2) NM NM PAT Margins (%) 5.1 6.6 4.6 0.4 (39.2) NM NM
Source: Company, DART
Segment wise
(Rs mn) 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 YoY (%) QoQ(%)
Revenue
Goods transport 4234 4320 4526 4166 1482 (65.0) (64.4)
Bus operations 1040 745 947 706 53 (94.9) (92.5)
EBITDA
Goods transport 629 585 608 479 (341) NM NM
Bus operations 205 46 170 65 (23) NM NM
Margin %
Goods transport 15 14 13 11 NM NM NM
Bus operations 20 6 18 9 NM NM NM
EBIT
Goods transport 356 294 320 142 (612) NM NM
Bus operations 137 (19) 108 8 (112) NM NM
Margin %
Goods transport 8.4 6.8 7.1 3.4 NM NM NM Bus operations 13.1 (2.6) 11.4 1.1 NM NM NM
Source: Company, DART
August 17, 2020 5
Revenue and Revenue growth trend EBITDA and EBITDA growth trend
Source: Company, DART Source: Company, DART
PAT and PAT growth trend EBITDA margin trend
Source: Company, DART Source: Company, DART
Split of fleet Segmental revenue split (%)
Source: Company, DART Source: Company, DART
7.4 14.4 12.6 4.9 2.1 1.3 1.1 (2.9)
(70.3)
(80)
(60)
(40)
(20)
0
20
1,000
2,000
3,000
4,000
5,000
6,000
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
Net sales (Rs m) - LHS Sales YoY growth (%) - RHS
(16.6)(3.1)12.7
35.2 47.4 35.3 14.3
(5.6)
(138.1) (150)
(100)
(50)
0
50
100
(400)
(200)
0
200
400
600
800
1,000
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
EBITDA (Rs m) - LHS EBITDA YoY growth (%) - RHS
(28.3)(4.5) 5.4 70.7 13.5 68.3
(2.9)
(89.6)
(328.4)
(400)
(300)
(200)
(100)
0
100
(600)
(450)
(300)
(150)
0
150
300
450
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
PAT (Rs m) - LHS PAT YoY growth (%) - RHS
11.4 10.5 12.6 11.7 16.5
14.0 14.3 11.4
(21.2)(25)(20)(15)(10)
(5)05
10152025
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
Small Vehicles
6%
LCV19%
HCV67%
Tankers1%
Cranes0%
Buses7%
Total Vehicles: 5,045
78 81 80 81 78 82 81 84 93
20 16 19 17 19 14 17 14 3
0
20
40
60
80
100
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
Goods transport Bus operations
August 17, 2020 6
Goods transport revenue and growth trend Goods transport EBITDA and margin trend
Source: Company, DART Source: Company, DART
Bus operation revenue and growth trend Bus operation EBITDA and margin trend
Source: Company, DART Source: Company, DART
9.3 17.1 13.7
5.0 3.3 3.0 2.8 0.0
(65.0)
(80)
(60)
(40)
(20)
0
20
40
8001,3001,8002,3002,8003,3003,8004,3004,800
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1Goods transport revenue (Rs m) - LHSYoY growth (% ) - RHS
10 12 13 13 15 14 13 11
-23(30)
(20)
(10)
0
10
20
(400)
(200)
0
200
400
600
800
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
Goods transport EBITDA (Rs m) - LHS
EBITDA Margin (%) - RHS
3.8 3.9 9.9 6.5 (3.1) (8.1) (8.3)(20.5)
(94.9)
(150)
(100)
(50)
0
50
0
200
400
600
800
1,000
1,200
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
Bus operations revenue (Rs m) - LHSYoY growth (% ) - RHS
17.0
(2.5)
15.8 10.0 19.8
6.2 17.9
9.2
(42.6)
(60)
(40)
(20)
0
20
40
(20)
30
80
130
180
230
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
Q1
FY2
0
Q2
FY2
0
Q3
FY2
0
Q4
FY2
0
Q1
FY2
1
Bus operations EBITDA (Rs m) - LHSEBITDA Margin (%) - RHS
August 17, 2020 7
Profit and Loss Account
(Rs Mn) FY19A FY20A FY21E FY22E
Revenue 21,095 21,185 16,417 20,937
Total Expense 18,655 18,203 14,494 17,573
COGS 14,743 14,103 11,264 14,080
Employees Cost 3,667 3,805 3,006 3,246
Other expenses 245 294 224 246
EBIDTA 2,440 2,983 1,923 3,365
Depreciation 1,006 1,675 1,692 1,851
EBIT 1,434 1,307 231 1,514
Interest 109 367 349 309
Other Income 79 103 128 140
Exc. / E.O. items 0 0 0 0
EBT 1,405 1,043 10 1,345
Tax 486 142 3 338
RPAT 919 901 7 1,006
Minority Interest 0 0 0 0
Profit/Loss share of associates 0 0 0 0
APAT 919 901 7 1,006
Balance Sheet
(Rs Mn) FY19A FY20A FY21E FY22E
Sources of Funds
Equity Capital 903 903 903 903
Minority Interest 0 0 0 0
Reserves & Surplus 5,556 5,265 5,273 5,556
Net Worth 6,459 6,169 6,176 6,460
Total Debt 1,407 1,893 1,593 1,493
Net Deferred Tax Liability 738 440 440 440
Total Capital Employed 8,604 8,502 8,210 8,393
Applications of Funds
Net Block 7,051 9,903 8,505 7,054
CWIP 416 44 0 0
Investments 1 1 1 1
Current Assets, Loans & Advances 2,311 2,221 3,552 5,032
Inventories 298 293 357 337
Receivables 795 823 945 918
Cash and Bank Balances 131 134 1,199 2,560
Loans and Advances 0 0 0 0
Other Current Assets 1,086 971 1,051 1,217
Less: Current Liabilities & Provisions 1,174 3,667 3,847 3,693
Payables 61 35 54 69
Other Current Liabilities 1,113 3,632 3,793 3,624
sub total
Net Current Assets 1,136 (1,445) (296) 1,339
Total Assets 8,604 8,502 8,210 8,393
E – Estimates
August 17, 2020 8
Important Ratios
Particulars FY19A FY20A FY21E FY22E
(A) Margins (%)
Gross Profit Margin 30.1 33.4 31.4 32.8
EBIDTA Margin 11.6 14.1 11.7 16.1
EBIT Margin 6.8 6.2 1.4 7.2
Tax rate 34.6 13.6 25.2 25.2
Net Profit Margin 4.4 4.3 0.0 4.8
(B) As Percentage of Net Sales (%)
COGS 69.9 66.6 68.6 67.3
Employee 17.4 18.0 18.3 15.5
Other 1.2 1.4 1.4 1.2
(C) Measure of Financial Status
Gross Debt / Equity 0.2 0.3 0.3 0.2
Interest Coverage 13.2 3.6 0.7 4.9
Inventory days 5 5 8 6
Debtors days 14 14 21 16
Average Cost of Debt 9.8 22.3 20.0 20.0
Payable days 1 1 1 1
Working Capital days 20 (25) (7) 23
FA T/O 3.0 2.1 1.9 3.0
(D) Measures of Investment
AEPS (Rs) 10.2 10.0 0.1 11.1
CEPS (Rs) 21.3 28.5 18.8 31.6
DPS (Rs) 5.5 7.0 0.0 8.0
Dividend Payout (%) 54.1 70.2 0.0 71.8
BVPS (Rs) 71.5 68.3 68.4 71.5
RoANW (%) 14.8 14.3 0.1 15.9
RoACE (%) 12.7 14.8 4.3 15.8
RoAIC (%) 18.1 15.5 3.0 23.6
(E) Valuation Ratios
CMP (Rs) 151 151 151 151
P/E 14.9 15.2 1826.2 13.6
Mcap (Rs Mn) 13,660 13,660 13,660 13,660
MCap/ Sales 0.6 0.6 0.8 0.7
EV 14,936 15,419 14,054 12,594
EV/Sales 0.7 0.7 0.9 0.6
EV/EBITDA 6.1 5.2 7.3 3.7
P/BV 2.1 2.2 2.2 2.1
Dividend Yield (%) 3.6 4.6 0.0 5.3
(F) Growth Rate (%)
Revenue 9.7 0.4 (22.5) 27.5
EBITDA 4.2 22.2 (35.5) 75.0
EBIT 5.0 (8.8) (82.4) 556.5
PBT 0.8 (25.7) (99.0) 13353.1
APAT (0.7) (2.0) (99.2) 13353.1
EPS (0.7) (2.0) (99.2) 13353.1
Cash Flow
(Rs Mn) FY19A FY20A FY21E FY22E
CFO 1,922 2,573 1,835 2,752
CFI (2,094) (1,186) (122) (260)
CFF 110 (1,384) (649) (1,131)
FCFF (190) 1,346 1,585 2,352
Opening Cash 194 131 134 1,199
Closing Cash 131 134 1,199 2,560
E – Estimates
DART RATING MATRIX
Total Return Expectation (12 Months)
Buy > 20%
Accumulate 10 to 20%
Reduce 0 to 10%
Sell < 0%
Rating and Target Price History
Month Rating TP (Rs.) Price (Rs.)
Nov-19 Accumulate 290 268
Feb-20 Accumulate 285 263
Mar-20 Accumulate 236 154
Jun-20 Accumulate 175 155
Jul-20 Accumulate 175 156
*Price as on recommendation date
DART Team Purvag Shah Managing Director [email protected] +9122 4096 9747
Amit Khurana, CFA Head of Equities [email protected] +9122 4096 9745
CONTACT DETAILS
Equity Sales Designation E-mail Direct Lines
Dinesh Bajaj VP - Equity Sales [email protected] +9122 4096 9709 Kapil Yadav VP - Equity Sales [email protected] +9122 4096 9735
Yomika Agarwal VP - Equity Sales [email protected] +9122 4096 9772
Jubbin Shah VP - Derivatives Sales [email protected] +9122 4096 9779
Ashwani Kandoi AVP - Equity Sales [email protected] +9122 4096 9725
Lekha Nahar AVP - Equity Sales [email protected] +9122 4096 9740
Equity Trading Designation E-mail
P. Sridhar SVP and Head of Sales Trading [email protected] +9122 4096 9728
Chandrakant Ware VP - Sales Trading [email protected] +9122 4096 9707
Shirish Thakkar VP - Head Domestic Derivatives Sales Trading [email protected] +9122 4096 9702
Kartik Mehta Asia Head Derivatives [email protected] +9122 4096 9715
Dinesh Mehta Co- Head Asia Derivatives [email protected] +9122 4096 9765
Bhavin Mehta VP - Derivatives Strategist [email protected] +9122 4096 9705
120
160
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Aug-1
9
Sep-1
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Oct-
19
Nov-1
9
Dec-1
9
Jan-2
0
Fe
b-2
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Mar-
20
Apr-
20
May-2
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(Rs) VRLL Target Price
Dolat Capital Market Private Limited. Sunshine Tower, 28th Floor, Senapati Bapat Marg, Dadar (West), Mumbai 400013
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