 Vote for ANTIQUE

ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 13 August 2019 | 1

Current Reco : HOLD 1QFY20 RESULTS REVIEW

Previous Reco
CMP
: HOLD
: INR263
VRL Logistics
Target Price : INR295 Below par again in 1Q after strong exit to FY19
Potential Return : 12%
VRL Logistics (VRLL) reported subdued 1Q with slowing down of topline
Asiamoney Brokers’ Poll 2019 growth to 2% on Goods/Passenger segment growth of ~3%/-3% YoY. GT
segment margins contracted QoQ (adjusting for IND-AS) after company exited
 Vote for ANTIQUE
FY19 on a high note. Management highlighted of 1) Tough macro creating
Voting closes on 16th August pressure on volume as well as Industry pricing growth; Company has comfort
at 5-6% volume growth for FY20; (2) FY20 capex to be capped at INR500-
Prateek Kumar 600mn, with no plans for new vehicle addition in near term; (3) Surat facility
+91 22 4031 3440 to commission on 15th August; (4) Recent floods to impact business activities
prateek.kumar@antiquelimited.com in Maharashtra/North Karnataka; (5) Increase in procurement of Bio-fuel
during 1Q; (6) IND-AS116 had a material impact on result's line items while
Nishant Shah over PAT impact was minimal. Overall tonnage growth revival remains a
+91 22 4031 3473
nishant.shah@antiquelimited.com
key focal point for investor in case of VRLL. We trim our EPS estimates by
9%/5% to factor in weakness in current macro environment. Accordingly,
we lower our fair value target to INR295 (earlier INR310) at 20x FY21 PE.
Market data
Sensex : 37,582 Topline growth slows to 2%; Adjusting for IND-AS impact, EBITDA +13% YoY (below estimates)
Sector : Logistics VRLL's 1Q topline growth slowed to 2% led by GT/Passenger segment growth of ~3%/-3%
Market Cap (INRbn) : 23.4 YoY. Reported EBITDA Margins came in higher at 16.5% (Antique est: 14.2%) versus 11.4%
Market Cap (USDbn) : 0.331 YoY/11.7% QoQ - largely reflecting impact of IND-AS116. EBITDA grew 48%YoY/QoQ to
O/S Shares (m) : 90.3 INR888mn in 1Q. Reported freight expense was lower Rs184mn as per INDAS and adjusting
52-wk HI/LO (INR) : 334/222 for same, EBITDA Margin for 1Q was at 13% and EBITDA growth at 17% YoY. There was a
Avg Daily Vol ('000) : 73 sharp increase in depreciation and interest cost attributable to INDAS impact - revised upwards
Bloomberg : VRLL IN by INR141mn/INR60mn respectively. PAT was lower by Rs11mn/PBT lower by Rs17mn due
Source: Bloomberg
to IndAS adjustments. Reported PAT grew 14% YoY to Rs275mn (est: Rs350mn).
Valuation GT segment volumes +4% YoY; segment margins dip 100 bps QoQ adjusting for IND-AS
FY19 FY20e FY21e In 1QFY20, GT segment revenue growth of 3% YoY was driven by 4% YoY volume growth
EPS (INR) 10.2 11.6 14.7 while realisation declined 1% YoY. The 1.6% QoQ revenue growth was led by 0.7%/0.9%
P/E 25.9 22.7 17.9 growth in tonnage and realizations. Increase in tonnage YoY was on account of increase in
P/BV 3.7 3.4 3.1 business from existent and new customers. Due to delay in monsoons, agriculture volumes
EV/EBITDA 10.3 7.2 6.1 were impacted in 1Q. Company undertook price increase/adjustment from 1st April on
Dividend Yield (%) 2.1 1.9 2.3 select routes. GT segment EBITDA margins came higher at 16.2% vs. 10.3% YoY/13.3%
Source: Company, Antique QoQ - largely reflecting INDAS impact of INR170mn on GT segment EBITDA. Adjusting for
same, segment margin was at 12.2% lower 100bps QoQ - the decline was attributable to
Returns (%) reduction in cash back discounts on Electronic tolls (Fastags) from 5% to 2.5% (impact of 0.4%
1m 3m 6m 12m
of sales), increase in Tyre and Hamaali expenses. In passenger segment, 3% YoY revenue
Absolute (4) 2 2 (22) growth was led by 8% YoY decline in passenger number (Bus numbers reduced to 363 vs
Relative (1) 2 (0) (21) 388 earlier) and 5% growth in realisation. 17% QoQ growth was led by 3.6% growth in
Source: Bloomberg passengers and 13% growth in realization. Bus segment's EBITDA margins at 20.2% vs 17%
Shareholding pattern YoY/10% QoQ.

Promoters : 68%
Other call highlights
Public : 32% (1) Incurred INR210mn capex in 1QFY20 and expect full year capex at INR500-600mn; not
Others : 0% looking to add any vehicles in near terms; (2) Surat facility to cater mainly to textiles market
which will add to the growth; During festive season, Company plans to allocate some existing
Source: Bloomberg
vehicles in this area and if volumes start increasing, would look to hire local vehicles and then
Price performance vs Nifty add new owned vehicles. Company can generate INR1Bn business from Surat facility only.
120 (3) Company scarped 18 buses during 1Q resulting in INR22.3mn write off in the books -
impacting margins in Bus segment; company also had a writedown of INR21.9mn in wind
100
power segment for which Suzlon has compensated INR20mn of the loss already in 1Q. (4)
80 Receivables haven't been impacted despite the business environment; 70% business is cash
60 and carry, which remains same as earlier. For other customers, Number of receivable days
Aug-18 Dec-18 Apr-19 Aug-19 have dipped from 18-19 to 14-15 days; (5) Procurement of Bio-fuel increased to 31.42% of
VRL Logistics NIFTY total fuel quantity in 1QFY20 (vs 18.1% YoY/15.4% QoQ with company identifying new fuel
source in North India (on trial basis).
Source: Bloomberg Indexed to 100
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 13 August 2019 | 2

Quarterly performance
Actual vs estimated performance
(INRmn) Actual Estimated Var (%) Consensus Var (%)
Net sales 5,396 5,689 (5.1) 5,451 (1.0)
EBITDA 888 806 10.2 704 26.1
EBITDA Margin (%) 16.5 14.2 229bps 12.9 354bps
PAT 275 350 (21.6) 285 (3.7)
EPS 3.0 3.9 (21.6) 3.1 (3.7)
Source: Company, Antique

Quarterly snapshot
(INR mn) 1QFY20 1QFY19 YoY (%) 4QFY19 QoQ(%)
Net sales 5,396 5,285 2.1 5,129 5.2
Expenditure 4,508 4,682 (3.7) 4,529 (0.5)
Operating profit 888 602 47.4 600 48.0
Other income 24 25 (3.6) 19 29.0
Interest 88 16 453.4 37 136.7
Depreciation 400 245 63.0 255 56.6
PBT 424 366 15.9 326 30.0
Tax 150 124 20.5 121 23.5
PAT 275 242 13.5 205 33.8
EBITDA margin (%) 16.5 11.4 506bps 11.7 475bps
EPS (Rs) 3.0 2.7 13.5 2.3 33.8
Source: Company, Antique

As % of Sales
1QFY20 1QFY19 change 4QFY19 change
% of Sales
Operating Expense 64.7 70.6 -587bps 69.3 -464bps
Employees Cost 17.1 17.0 13bps 17.7 -52bps
Other Expenses 1.7 1.0 69bps 1.3 40bps
Segmentwise
Revenue
Goods transport 4,234 4,099 3.3 4,166 1.6
Bus operations 1,040 1,072 (3.1) 888 17.1
EBITDA
Goods transport 685 422 62.6 553 23.8
Bus operations 210 183 14.8 88 137.0
Margin %
Goods transport 16.2 10.3 590bps 13.3 290bps
Bus operations 20.2 17.0 313bps 10.0 1020bps
Source: Company, Antique

Change in estimates
Key parameters FY20E FY21E
Old New % Chg Old New % Chg
Revenue (INRm) 23,436 22,538 (3.8) 26,258 25,268 (3.8)
EBITDA (INRm) 2,876 3,431 19.3 3,393 3,945 16.3
EBITDA margin (%) 12.3 15.2 295bps 12.9 15.6 269bps
Net profit (INRm) 1,149 1,049 (8.8) 1,398 1,326 (5.2)
EPS (INR) 12.7 11.6 (8.8) 15.5 14.7 (5.2)
Source: Company, Antique
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 13 August 2019 | 3

Sales and sales growth trend EBITDA and EBITDA growth trend
6,000 16 1,000 60
14.4 47.4
12.6 14 900 50
5,000 800 35.2
10.5 12 40
4,000 700
8.4 10 30
7.2 7.4 600
3,000 8 500 11.9 12.7 20
4.9 7.5 6.4
6 400 4.1
2,000 10
300 (3.1)
2.1 4 0
1,000 0.4 200
2 (16.6) -10
100
- 0 - -20
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20
Net sales (INRm) - LHS Sales YoY grow th (%) - RHS EBITDA (INRm) - LHS EBITDA YoY grow th (%) - RHS
Source: Company, Antique Source: Company, Antique

PAT and PAT growth trend EBITDA margin trend

400 80 18
70.7 16.5
55.7 17
350
43.4 60 16 14.7
300 15
27.5 40
250 14 12.6 12.6
15.9 13.5 12.3
200 5.4 20 13 11.4 11.7
(4.5) 12
150 10.5
0 11
100 (28.3) 9.1
10
-20
50 9
- -40 8
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20
PAT (INRm) - LHS PAT YoY grow th (%) - RHS EBITDA Margin (%)
Source: Company, Antique Source: Company, Antique

Split of fleet Proportion of bio-diesel (%)

Car Carrier, 35
Total Vehicles:  101, 2% 31.4
HCV, 3085, 30 27.5
65%
Tankers, 13,
25
0%
20 18.1 17.1
Cranes, 13, 15.4
0% 15
10

Buses, 363, 5
7%
0
1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

Small
Vehicles,
LCV, 1009, 257, 5%
21% Proportion of Bio diesel
Source: Company, Antique Source: Company, Antique
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 13 August 2019 | 4

Goods transport revenue and growth trend Bus operation revenue and growth trend
5,000 18 1,200 16
17.1 13.3
4,500 13.7 16 14
1,000 9.9 9.9 12
4,000 11.0 14 9.0
3,500 9.3 9.3 12 800 7.0 10
6.5
3,000 10 8
2,500 5.9 8 600 3.8 3.9 6
5.0
2,000 3.3 6 4
1,500 4 400 2
1,000 (0.5) 2
500 0 200 (3.1) 0
-2
- -2
- -4
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20
Goods transport revenue (INRm) - LHS Bus operations revenue (INRm) - LHS
YoY grow th (% ) - RHS YoY grow th (% ) - RHS
Source: Company, Antique Source: Company, Antique

Goods transport EBITDA and margin trend Bus operation EBITDA and margin trend
800 18 250 25
16.2 21.9 20.2
700 13.6 12.9 13.1 13.3 16 17.0
12.7 200 15.9 15.8 20
11.9 14
600
10.1 10.3 12
500 150 15
10 10.0
400 6.7
8 100 10
300 4.2
6
200 4 50 5
100 2 (2.5)
- 0
- 0
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20
1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

(50) -5

Goods transport EBITDA (INRm) - LHS Bus operations EBITDA (INRm) - LHS
EBITDA Margin (%) - RHS EBITDA Margin (%) - RHS
Source: Company, Antique Source: Company, Antique

Goods transport volume and realisation growth trend Segmental revenue split (%)
12 100
10.5
90 21 17 19 17 20 16 19 17 19
10
80
8 7.0 7.0 7.0 70
6.0
6 60
4.2
3.5 50
4 3.0
40 76 79 79 81 78 81 80 81 78
1.6
2 30
0 20
10
-2 (0.6)
0
1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

GT Volume grow th (%) GT Realisation grow th (%) Goods transport Bus operations
Source: Company, Antique Source: Company, Antique
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 13 August 2019 | 5

Financials
Profit and loss account (INRm) Cash flow statement (INRm)
Year ended 31 Mar 2017 2018 2019 2020e 2021e Year ended 31 Mar 2017 2018 2019 2020e 2021e
Net Revenue 18,031 19,223 21,095 22,538 25,268 PBT 1,053 1,394 1,405 1,603 2,027
Op. Expenses 15,849 16,881 18,655 19,107 21,323 Depreciation & amortisation 953 976 1,006 1,604 1,781
EBITDA 2,182 2,342 2,440 3,431 3,945 Interest expense 237 113 110 310 226
Depreciation 982 976 1,006 1,604 1,781 Tax paid (196) (510) (523) (555) (701)
EBIT 1,200 1,366 1,434 1,827 2,164 Less: Interest/Div. Income Recd. (4) (1) (1) (86) (89)
Other income 93 142 79 86 89 Other operating Cash Flow (64) 83 (75) (138) (196)
Interest Exp. 240 114 109 310 226 CF from operating activities 1,980 2,055 1,922 2,738 3,048
Reported PBT 1,053 1,394 1,405 1,603 2,027 Capital expenditure (627) (473) (2,112) (600) (1,200)
Tax 348 468 486 555 701 Inc/(Dec) in investments 6 19 2 - -
Reported PAT 705 926 919 1,049 1,326 Add: Interest/Div. Income Recd. 12 0 1 86 89
Net Profit 705 926 919 1,049 1,326 CF from investing activities (596) (441) (2,094) (514) (1,111)
Adjusted PAT 705 926 919 1,049 1,326 Inc/(Dec) in share capital - (387) - - -
Adjusted EPS (INR) 7.7 10.2 10.2 11.6 14.7 Inc/(Dec) in debt (775) (1,036) 596 (600) -
Dividend Paid (682) (120) (485) (854) (879)
Balance sheet (INRm) CF from financing activities (1,457) (1,543) 110 (1,454) (879)
Year ended 31 Mar 2017 2018 2019 2020e 2021e Net cash flow (73) 71 (62) 770 1,058
Share Capital 912 903 903 903 903 Opening balance 196 122 194 131 901
Reserves & Surplus 4,500 5,029 5,556 6,061 6,734 Closing balance 122 194 131 901 1,959
Networth 5,412 5,932 6,459 6,964 7,637
Debt 1,847 812 1,407 807 807 Growth indicators (%)
Net deferred Tax liabilities 896 808 738 738 738 Year ended 31 Mar 2017 2018 2019 2020e 2021e
Capital Employed 8,155 7,552 8,604 8,508 9,182 Revenue(%) 4.7 6.6 9.7 6.8 12.1
Gross Fixed Assets 8,765 9,028 10,813 11,829 13,029 EBITDA(%) -19.4 7.4 4.2 40.6 15.0
Accumulated Depreciation 1,826 2,778 3,763 5,366 7,148 Adj PAT(%) -32.4 31.3 -0.7 14.1 26.4
Capital work in progress 18 76 416 - - Adj EPS(%) -32.4 32.7 -0.7 14.1 26.4
Net Fixed Assets 6,957 6,326 7,467 6,463 5,882
Investments 1 1 1 1 1 Valuation (x)
Non Current Investments 1 1 1 1 1 Year ended 31 Mar 2017 2018 2019 2020e 2021e
Current Assets, Loans & Adv. 2,010 2,296 2,311 3,267 4,568 P/E 34.1 25.7 25.9 22.7 17.9
Inventory 183 241 298 262 292 P/BV 4.4 4.0 3.7 3.4 3.1
Debtors 754 807 795 926 1,038 EV/EBITDA 11.8 10.5 10.3 7.2 6.1
Cash & Bank balance 122 194 131 901 1,959 EV/Sales 1.4 1.3 1.2 1.1 0.9
Loans & advances and others 950 1,054 1,086 1,178 1,278 Dividend Yield (%) 1.5 - 2.1 1.9 2.3
Current Liabilities & Prov. 812 1,071 1,174 1,223 1,269
Liabilities 716 868 910 958 1,004
Financial ratios
Provisions 95 203 264 264 264
Year ended 31 Mar 2017 2018 2019 2020e 2021e
RoE (%) 13.4 16.3 14.8 15.6 18.2
Net Current Assets 1,198 1,225 1,136 2,045 3,299
RoCE (%) 15.4 19.2 18.7 22.4 25.5
Application of Funds 8,155 7,552 8,604 8,508 9,182
Asset/T.O (x) 2.1 2.3 2.7 2.8 3.0
Per share data Net Debt/Equity (x) 0.3 0.1 0.2 0.0 -0.2
Year ended 31 Mar 2017 2018 2019 2020e 2021e EBIT/Interest (x) 5.4 13.2 13.9 6.2 10.0
No. of shares (m) 91 90 90 90 90
Diluted no. of shares (m) 91 90 90 90 90
Margins (%)
BVPS (INR) 59.3 65.7 71.5 77.1 84.5
Year ended 31 Mar 2017 2018 2019 2020e 2021e
EBITDA Margin(%) 12.1 12.2 11.6 15.2 15.6
CEPS (INR) 18.5 21.1 21.3 29.4 34.4
EBIT Margin(%) 6.7 7.1 6.8 8.1 8.6
DPS (INR) 4.0 - 5.5 5.0 6.0
PAT Margin(%) 3.9 4.8 4.4 4.7 5.2
Source: Company, Antique
Source: Company Antique
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 13 August 2019 | 6

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Antique Stock Broking Limited
20th Floor, A Wing, Naman Midtown
Senapati Bapat Marg, Elphinstone (West)
Mumbai 400013
Tel. : +91 22 4031 3444 • Fax : +91 22 4031 3445
www.antiquelimited.com