Investment Recommendation

VRL Logistics Ltd 

VRL Logistics Ltd – IPO Note

Price Band – Rs.195-Rs.205

Recommendation – SUBSCRIBE to the issue for listing gain as well as long term investment

 

VRL logistics Ltd (VRL) , a Karnataka based company is one of the leading pan-India surface logistics and parcel delivery service providers. VRL enjoys a wide distribution network in 28 states and 4 union territories comprising of 624 branches( incl 48 hubs) and 346 agencies. The company has its in-house preventive maintenance facility at Hubballi, Karnataka. In goods transport business the company serves a wide range of customers like FMCG, Imperishable goods, pharmaceutical products , machines etc
 
Between FY10-14 VRL’s revenues grew at CAGR of 20.4% while EBIDTA grew at a CAGR of 10.7%. Going forward, with high capex and increase in number of vehicles, we expect the company to continue exhibiting high growth trend and Lower fuel prices would support to the increase in margin. Moreover, the high growth in the industry coupled with shift from unorganized to organized player will also fuel and support growth for company. On the valuation front, at the given upper band price of issue of Rs 205, VRL is offered at PE of 19.6 its post issue diluted FY15 EPS and 7.6x of its FY15 EV/EBIDTA which is lower than its peer. We recommend subscribing to the issue for listing gain as well as long term investment.

MARKET OUTLOOK- 15TH APRIL : 2015

Dear Customer,

 

Markets always tend to be interesting with something or the other happening all the time. Our Morning Mantra is released before the opening bell and it includes the market commentary along with Corporate & Global news for the day.

 

• The Dow and S&P 500 ended higher on Tuesday, helped by energy stocks and March-quarter earnings reports that topped modest expectations following worries about a strong dollar.

Dow Jones	18036.7	+59.7	+0.33%
Dow Futures	17964.0	+54.0	+0.30%
Hangseng	27674.4	+112.9	+0.41%
Nikkie	19909.1	+0.5	+0.00%
SGX Nifty	8842.5	+14.5	+0.16%

 

• Asian share markets took a cautious stance on Wednesday ahead of an anxiously-awaited reading on China's growth pulse, while the dollar nursed losses after a disappointing reading on consumer spending nudged bond yields lower.
• Market is expected to open on flattish note but may see some profit booking during the day.
• Skipper Limited is looking to expand production of PVC pipe to 100,000 tonne in next three years from current 10,000 tonnes. Moreover, in order to cater to the western region of India, the company has commissioned manufacturing facility at Ahmedabad in Gujarat.
• Ipca Laboratories, which intends to buy a majority stake in Hyderabad-based Krebs Biochemicals, will start its open offer today to acquire the mandatory 26% shares from the public. With the existing share price of Krebs being far higher than the open offer price of Rs 54, the company may face troubles in buying the targeted quantity.
• SC directs Deccan Chronicle to sell properties to repay Indiabulls loan. In 2013, IHFL had taken possession of two residential and three commercial properties mortgaged by DCHL after it defaulted on its payments for loan of about Rs 100 cr
• Escorts Limited has entered into a joint venture with Amul Group for manufacturing 'Steeltrac' - a specialty tractor. Escorts will hold 40% in the new company and Amul Group the rest of the equity.
• Deepak fertiliser sells 12.1% stake in MCFL for an estimated Rs 125.69 crore, through the open market route.
• Gateway Distriparks is aiming to list its rail unit unit Gateway Rail Freight by the end of the current year and can value unit at nearly $500 million
• Torrent Pharmaceuticals is close to sealing deal to acquire dermatology business of Encore group for Rs 350 Cr plus – TOI
• Bosch Will Lift Lockout At its Jaipur Plant w.e.f. First Shift Of April 15
• Bajaj Auto Launches New Pulsar Series Of Bikes and priced Pulsar AS200 At Rs 91,500 and Pulsar AS15O At Rs 79,000
• ICICI Bank has cut home loan rate by 25 bps and Axis Bank has cut it by 20 bps
• Alstom T&D India Gets Order Worth Rs 56.9 Cr Form BARC For Its Challakere Unit In Karnataka
• Muthoot Finance Group has entered into the home loan segment with the launch of Muthoot Homfin
• DHFL reduced its home loan rate by 25 basis points to 9.9%
• JLR has reported its strongest ever March retail sales at 58,481 unit +6% yoy
• ABG Shipyard would bring an equal partner in the business by mid-August. This is expected to help the debt-burdened firm focus on defence-sector orders. "There are two roles to be played here. One of an investor, the other who has the technical know-how. We may have either one entity doing both roles or two entities carrying out the two roles. We are still in talks and are yet to decide that," an official of ABG Shipyard told the Business Standard.
• Consumer Price Index (CPI)-based inflation eased to 5.17% in March, the lowest in three months, aided by lower food prices. For February, CPI inflation stood at 5.37%, January 5.19% and March 2014 8.25%.
• Capital Goods – Sector Preview – Institution Desk: We expect a selective recovery in corporate earnings for the fourth quarter ended March 2015, which is seasonally the strongest quarter for the capital goods sector. Revenue growth is likely to be soft owing to a relatively weak order book amid lack of industrial capex revival. Various cost optimisation measures are likely to lead to an improvement in the margin profile of most companies, albeit on a low base. While the companies in our coverage universe are expected to post 6%/38%/43% YoY decline in revenue/EBITDA/PAT, respectively, the numbers are largely suppressed because of the underperformance of Bharat Heavy Electricals (BHEL). Excluding BHEL, we expect our coverage universe to report a 5% YoY growth in revenue along with a 14% YoY rise in EBITDA (50bps rise in operating margin) and a 15% YoY increase in PAT (30bps rise in net profit margin). Management commentaries on ground-level improvement in industrial capex and the outlook on new order inflow and price realisation will be keenly monitored.   
• Information Technology – Sector Initiating Coverage – Institution Desk: We initiate coverage on the Indian IT services sector with a negative view and expect a market cap-weighted return of -7% till March 2016. We expect the sector to grow at 8%-10% rate over FY15E-FY18E in US dollar (USD) terms, at least 200bps-400bps below current consensus estimate with a downside risk. The sector’s growth, in our view, will be under pressure from: (1) Low IT spending because of tepid sales growth across enterprises in developed countries, and (2) Value/volume compression within the legacy business (likely >50% of revenue) because of increased automation and intense competition on convergence of capabilities/strategies among Tier-1 Indian players. ‘Digital’ is not going to move the needle materially.

 

• Results Announced

ACC	ACC result improved Though Sales came lower at Rs.2885cr vs exp 3112cr yoy 2967cr Adj EBITDA came ahead of exp at  Rs. 469cr vs exp 401 yoy 425cr. Adj PAT came at Rs.255cr vs exp 226 yoy 396cr (Mar-14 PAT high on a/c of tax reversal and higher other income)
8k Miles	Result is ok
DCB	DCB Bank result good NII came at 130cr vs qoq 122cr and yoy 100cr yoy growth of 30%. Profit before provisioning came at Rs.68cr qoq Rs.68cr yoy 50cr yoy increase of 35%. Provision came at 14cr vs qoq 18cr yoy 11cr. PAT increased substentially to Rs. 63cr vs qoq Rs.43cr yoy 39cr on account of w/back of tax. Gross NPA came at Rs.186cr vs qoq 179cr and yoy 138cr. FY15 EPS is Rs.7.21 PE is 16x P/BV is 2.11 and ROE is 12.5%

 

• Result to be Announced (PAT Rs cr)

Companies	Mar’14	Dec’14	Mar’15 Exp
Network 18 Media	-4.1	-12.2	na
TV18 Broadcast Ltd.	35.9	60.4	na
RIIL	6.7	5.3	na

 

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MORNING MANTRA- NIFTY OUTLOOK 15TH APRIL, 2015

Nifty (8834.00, +53.65, +0.61%)
While the index is already in the supply zone yet we have to say the trend is still quite strong in that the momentum oscillators are still rising and so long as we see a sharp down day indicating reversal of a trend, it is likely to continue further. Today, the most critical level would be the 8800-mark; if the bulls were to be able to stay above this level then there would not be any weakness whatsoever. On the way up, again we need to monitor 8849 through 8891 supply zone—the significance of this zone lies in the fact that if the bulls were to be able to take it out decisively, we may see a fresh new top above 9119 in the current upswing; however, a failure to post a new top after clearing 8891 may suggest something to contrary.

• Most critical level for the day: 8800


• Strong resistance: 8849 – 8891


• Major resistance: 9060 – 9119


• Strong support: 8775 – 8754


• Major support: 8663 – 8650

Bank Nifty (18798.25, -2.60, -0.01%)

The index closed flat but what is more significant is the fact that it is failing to clear 18880 through 18900 supply zone over the last three consecutive trading sessions. Thus, that zone would act like the line of control—once seized and taken out by the bulls, the index would march ahead and higher while a failure to do so would imply a probable retreat and consolidation again at lower levels. Thus, today’s session for the Bank Nifty means a great deal: either we see the bulls marching forward or else the beat a hasty retreat to regroup their forces here. One thing needs to be noted here is that the bulls—despite their failure to push things beyond the 18900-mark—start with an advantage since they have ample support zones on the way down: first, between 18765 and 18552, and again from 18446 through 18421. Thus, unless the bears are able to push the index below the 18421 level, the bank bulls even if they were to beat a hasty retreat can always recharge their batteries and start firing on all cylinders.

• Most critical levels for the day: 18880 – 18900, its strong resistance zone as well


• Strong support: 18765 – 18552


• Major support; 18446 – 18421


• Major resistance: 19060 - 19195

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