Why is VRL Logistics Ltd falling/rising?

Recent Price Movement and Market Context

VRL Logistics has recorded a steady ascent over the past week, delivering a 4.06% return compared to the Sensex’s modest 0.53% gain. Despite a slight month-to-date decline of 0.60%, the stock has outperformed the benchmark index over the year, generating an 18.08% return against the Sensex’s 8.49%. This performance is particularly impressive given the logistics sector’s overall positive momentum, which has seen a 4.56% gain on the day of the price rise.

On 28-Jan, the stock touched an intraday high of ₹264, marking a 2.25% increase, and has been on a two-day winning streak, accumulating a 5.84% return during this period. Although it underperformed the sector by 2.75% on the day, the rising delivery volume of 1.97 lakh shares on 27-Jan—an 85.58% increase over the five-day average—signals heightened investor participation and confidence in the stock’s prospects.

Financial Strength and Operational Efficiency

VRL Logistics’ recent price appreciation is underpinned by its strong financial fundamentals. The company boasts a high Return on Capital Employed (ROCE) of 15.42%, reflecting efficient management and effective utilisation of capital. Operating profit growth has been particularly robust, expanding at an annual rate of 77.50%, which underscores the company’s ability to scale its core operations profitably over the long term.

Moreover, VRL Logistics has consistently delivered positive results over the last five consecutive quarters. Its Profit After Tax (PAT) for the latest six months stands at ₹99.93 crore, representing a remarkable growth of 102.86%. The company’s operating cash flow for the year has reached a peak of ₹557.80 crore, further highlighting strong cash generation capabilities. Additionally, the dividend per share (DPS) has hit a record high of ₹15.00, signalling management’s commitment to returning value to shareholders.

Valuation and Institutional Confidence

The stock’s valuation metrics further support its recent gains. With a ROCE of 18.6 and an enterprise value to capital employed ratio of 2.6, VRL Logistics is trading at a discount relative to its peers’ historical averages. This attractive valuation is complemented by a low Price/Earnings to Growth (PEG) ratio of 0.1, indicating that the stock’s price growth is not only justified but potentially undervalued given the company’s profit surge of 176.6% over the past year.

Institutional investors hold a significant 27.24% stake in VRL Logistics, reflecting strong confidence from entities with the resources and expertise to thoroughly analyse the company’s fundamentals. This institutional backing often provides stability and can act as a catalyst for sustained price appreciation.

Technical Indicators and Trading Liquidity

From a technical perspective, VRL Logistics’ current price is above its 5-day and 20-day moving averages, signalling short-term bullish momentum. However, it remains below the 50-day, 100-day, and 200-day moving averages, suggesting some resistance at longer-term levels. The stock’s liquidity is adequate, with a trade size capacity of approximately ₹0.12 crore based on 2% of the five-day average traded value, facilitating smooth trading activity without significant price disruption.

Overall, the combination of strong financial results, sectoral tailwinds, attractive valuation, and increased investor participation explains the recent rise in VRL Logistics’ share price. While the stock has slightly underperformed the sector on the day, its longer-term performance and fundamentals remain compelling for investors seeking exposure to the logistics industry.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →