March quarter LPG volumes improved for this logistics firm materially, the foreign brokerage said in its latest note, adding that the commissioning of 4 million tonne per annum Kandla LPG terminal will drive volume growth in FY23.
The brokerage has maintained a ‘Buy’ on the stock with a target of Rs 425, suggesting a 100 per cent potential upside. The scrip closed at Rs 213.35 on Wednesday.
Aegis is a play on liquids and LPG (gas) logistics. Its growth in the LPG business is driven by growth in LPG imports into India, as domestic production remains weak while consumption rises with an increased need for clean cooking fuel and increased affluence, Nomura said.
The company’s liquid division, which includes third party liquid logistics and operations and maintenance services, accounted for about 33 per cent of Ebitda in the March quarter. Gas division accounted for the remaining 67 per cent Ebitda. This segment includes auto gas retailing, industrial gas distribution and gas sourcing.
The company has recently gained new capabilities with its JV with Vopak, which enables the company to increase the products it can handle across liquids and even new gases like ammonia and butadiene, Nomura India said.
Nomura said commissioned the Kandla LPG terminal in May, which finally cleared the path for closure of the Vopak deal, albeit with a two-month delay.
The Kandla terminal not only is a key volume driver in the near term — Nomura estimates 0.5-0.7 million tonne logistics volume in FY23 –, but can also drive up distribution volumes by 10kt in FY23.
“We expect a string of growth project announcements in industrial terminals, new products and further capacity expansions in the following months. Of note, Aegis has already decided to progress with five projects under the JV with planned capex of Rs 1,250 crore . We believe the Aegis Vopak JV benefits are not well understood by investors at present,” it said.
Nomura said Aegis distribution sales have already crossed 50 kt in March quarter, and a further uptick from the normalisation of auto gas sales to pre-pandemic levels, and
contribution from the addition of five more LPG bottling plants may achieve a quarterly volume rate of over 40kt.
Profitability of the distribution segment at Rs 5,000-10,000 per tonne is almost 5-10 times higher than gas logistics. Furthermore, the acquisition of 0.5mntpa of liquids capacity in Kandla will also support strong liquids volume growth, it said.
The company reported a 46 per cent YoY rise in net profit at Rs 102 crore for the March quarter. Revenues jumped 108 per cent YoY to Rs 2,104 crore. While gas division Ebitda grew 22 per cent YoY to Rs 111 crore the normalised liquid division Ebidata was flattish at Rs 54 crore.
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