VRLLOG - VRL Logistics Limited Share Price

During the Q4 FY'25 earnings call, management provided a positive outlook highlighting strong revenue growth and improved profit margins. The company reported a revenue increase from INR 722 crores to INR 812 crores, reflecting a 5% year-on-year growth, primarily due to an 18% rise in freight realization from INR 6,724 to INR 7,944 per ton. The EBITDA surged by 74% from INR 109 crores to INR 189 crores, with margins improving from 14% to 23%.

In response to strategic adjustments, management discontinued low-margin business segments, leading to a reduction in tonnage while enhancing overall margins. Specifically, the total tonnage in the current quarter decreased to approximately 1,006,000 metric tons, influenced by branch closures and the discontinuation of specific low-margin accounts.

On a full-year basis, revenues increased from INR 2,909 crores to INR 3,186 crores. Net profit rose significantly from INR 89 crores to INR 183 crores for FY'25, with a corresponding increase in cash generated from operational activities from INR 409 crores to INR 587 crores.

Looking ahead, management plans to sustain this growth trajectory with an expected increase in branches"”targeting 80 to 100 new branches in FY'26. They also anticipate a rebound in tonnage growth from quarter 3 onwards, as they continue to capitalize on their wide customer base of about 9 lakh customers and innovative operational efficiencies.

Management emphasized the importance of maintaining margins despite pressures from competition, asserting a commitment to rationalization strategies without reverting to low-margin businesses. They targeted an EBITDA margin around 19-20% going forward, with expectations of realizing a 6-7% growth in freight rates for FY'26. The focus on operational efficiency, healthy cash flow, and strategic capital expenditure underscores their confidence in navigating market challenges.

Major Q&A from Earnings Call Transcript:

1. Question: "Could you help us understand if this activity [discontinuing low-yielding customers] is done from your side? Or is there more such cleanup or discontinuation that we can continue to see going forward?"
   Answer: We've mostly completed this cleanup, starting from early March. Most contracts were due for renewal, and we assessed contributions and margins. We cut down on low-margin business to grow volumes.

2. Question: "What steps are we taking to get back some volume growth back in the system?"
   Answer: We're focusing on healthy growth, planning to open 80-100 new branches next financial year. Growth from existing branches is expected as we emphasize volume from newly opened locations.

3. Question: "If overall economic conditions remain weak, will we consider price cuts to regain volumes?"
   Answer: We will maintain our pricing strategy moving forward, focusing on rationalized rates without reverting to low-margin businesses, even if it means flat tonnage for a while.

4. Question: "Are you seeing a demand recovery among existing clients?"
   Answer: Growth from existing clients is only 2-3%. Demand remains subdued, necessitating a focus on maintaining realizations and rationalizing our offerings.

5. Question: "Could you provide guidance on volume growth, realizations, and margins for FY '26?"
   Answer: Expect negative growth for the first two quarters, but tonnage should improve in Q3. Realization growth could be around 6-7% with margins expected to stabilize around 19-20% throughout the year.

6. Question: "What are your expectations for the capex in FY '26?"
   Answer: We anticipate a capex of around INR140-150 crores, primarily for vehicle procurement, alongside some investments in properties to support our long-term growth strategy.

These questions and answers reflect the strategic focus of VRL Logistics on maintaining margins, rationalizing costs, and cautiously growing volumes amidst challenging economic conditions.