VRL Logistics (VRLL) posted revenue growth of 5% YoY, largely on the back of higher realisation (+18%; price hike and customer mix) offsetting the 11% YoY contraction in volumes (discontinuation of low margin contracts). EBITDA margin surged to a record 23.1%, boosted by higher realisation and cost optimisation (high bulk fuel purchases, lower lorry hire charges). EBITDA/PAT shot up 77%/245% YoY.
VRLL is focusing on maximising profitability, and has indicated normalised capex on vehicles while it continues to scout for more investments in warehouses. We are raising FY26E/27E EPS by 6%/10% to reflect higher margins, offsetting lower volume assumptions. Maintain ‘BUY’ with a Mar-26E TP of INR740 (earlier INR670).
Volume decline more than offset by realisation
VRLL reported modest 5% YoY revenue growth on the back of 18% YoY uptick in realisation (price hikes in 3Q and customer mix), more than offsetting the 11% YoY drop in volume as it discontinued low-margin customer contracts. With this, gross margin expanded 970bp YoY to 41.5% (gross profit up 38% YoY). In addition, VRLL optimised costs across several counts—including fuel cost (-350bp YoY), lorry hire charges (-420bp YoY)—driving 940bp YoY expansion in EBITDA margins to a record 23.1%. EBITDA jumped 77% YoY (18%/23% above our/consensus estimate). PAT soared 245% YoY to INR743mn (42% above our estimate; 53% above consensus).
Realisation and profitability in focus; capex to continue
VRLL has discontinued low-margin business agreements (since mid-Feb’25); it is now focused on garnering volumes with better realisation/margins contracts. 1HFY26 is likely to mark softness in volumes, followed by a scale-up from 3Q on the back of branch additions and partial return of discontinued contracts as it believes low-cost unorganised players are unlikely to match VRLL’s efficiency. Realisation shall hold at current levels as per VRLL. It has indicated no net additions are likely in FY26 as it aims to only replace certain aging vehicles while branch additions continue to be the focus area (80–100 in FY26E versus 40 in FY25). VRL will continue to generate healthy cash flows, which will be utilised to fund capex (mainly properties) and repay debt.
Strong earnings growth to sustain; maintain ‘BUY’
While we are cutting volume estimates by up to 13% (largely to reflect discontinuation of low-value contracts), we are raising realisation and consequently margin assumptions to reflect VRLL’s guidance. We are increasing FY26E/27E EPS by 6.4%/9.8%. Valuing VRLL at an unchanged 27x FY27E EPS yields a TP of INR740 (earlier INR670); maintain ‘BUY’.
