VRL Logistics surges 6%, hits new high on strong business outlook

In the past one month, the stock has outperformed the market by surging nearly 30 per cent as compared to 1 per cent decline in the S&P BSE Sensex.

Shares of VRL Logistics surged 6 per cent to hit a record high of Rs 599.55 on the BSE in Thursday’s intra-day trade on strong business outlook. The stock of the logistics solution provider surpassed its previous high of Rs 591.50 touched on February 7, 2022.

In the past three days, the stock has rallied 17 per cent after VRL Logistics signed Memorandum of Understanding (MoU) on April 18, 2022 with Ratna Cements (Yadwad) for transfer of the Wind Power (Sale of Power) undertaking along with all underlying assets and liabilities as a going concern on a slump sale basis.

The management of the company is looking to dispose off this undertaking considering the limited balance life of the said machines as also to focus on its Goods Transport business which is the major business segment, VRL Logistics said.

In the past one month, VRL Logistics has outperformed the market by surging nearly 30 per cent as compared to 1 per cent decline in the S&P BSE Sensex.

On April 6, 2022, VRL Logistics announced a capex plan of Rs 560 crore to purchase 1,600 trucks (~25,000t carrying capacity) spread over the next 12-18 months. This capex is essential to replace its older fleet that moves out due to the vehicle scraping policy and capture the pick-up in demand in the less than load (LTL) segment.

It is expected that the company would lose owned fleet capacity of upto 12,000 MT owing to scrapping owing vehicles. The proposed capacity addition duly staggered over the period indicated above would result in the addition of around 25,OOO MT resulting in a net addition of upto 13,000 MT (around 20 per cent of existing fleet capacity). This would also cater to expected growth volumes in the near medium term, the company informed.

Motilal Oswal Financial Services believe VRL Logistics would be very well placed to capitalize on the growth opportunity after this capacity addition. With strong balance sheet, the company would comfortably manage the capex funding by availing an additional debt of Rs 300-350 crore along with internal accrual, the brokerage firm said with ‘buy’ rating on the stock and target price of Rs 665 per share.

Tech view

Outlook: Bullish

Support: Rs 571

Target: Rs 705

The shares of VRL Logistics are trading in their all-time high zone with a strong bullish candle on the daily charts. With today's gap-up trade, the stock has breached above the Bollinger Band resistance, placed at Rs 583. 

However, while the price-to-moving average action suggests positive bias for the stock on the daily charts, certain momentum indicators demand caution. The 14-day Relative Strength Index (RSI) is in the overbought zone and the slow Stochastic indicator suggests consolidation.

Meanwhile, Directional Index is trending upwards along with bullish bias in the MACD. The stock's immediate support is placed at Rs 583, followed by Rs 571. On the upside, the stock can rally to Rs 705-odd levels, based on the yearly Fibonacci charts.

(With inputs from Nikita Vashisht)