Aegis Logistics Ltd.:: report by Sushil Research,

Aegis Logistics has come out with decent set of numbers for Q4FY13. We attended the
concall and some of the key takeaways are:-
For Q4FY13, as guided by the management its consolidated revenues de-grew by 51.4%
YoY and 14.3% QoQ to Rs.7450.9 Mn. Its volumes in the B2B gas segment have come down
drastically impacting the revenue. For FY13 the revenue is down by 10.8% YoY to
Rs.39816.4 Mn in line with our estimates.
Its Liquid Division has seen a growth of 22.6% YoY in Q4FY13 to Rs.292.9Mn with Liquid
PBT at Rs.133.2 Mn and PBT margin of 45.5% up 260 bps. Its Liquid revenue for FY13 is up
by 17% YoY due to higher volumes from debottlenecking at Mumbai and higher capacity
utilization at Kochi.
Its Gas revenue for Q4FY13 is down by 52.5% YoY to Rs.7158.0 Mn due to lower volumes
from the B2B segment. The company’s wholesale business contributes more than 80% of
its gas revenue, thus as the volumes from this segment have fallen drastically due to lower
offtake from oil PSU’s the revenue is impacted. Its B2B volumes have fallen from 620,000
MT in FY12 to 417,000 MT in FY13. However the higher margin distribution business
volumes have increased by 35.9% YoY to 53,000 tonnes thus reducing the impact at
EBITDA level. For FY13 its gas revenue is down by 11% YoY to Rs.38741.3 Mn but
normalized EBITDA is up by 11.8% to Rs.951 Mn.
Its EBITDA has come in green in Q4FY13 at Rs.82.7 Mn after losses in the preceding three
quarters as the company has decisively closed all the outstanding options contract.
Normalized EBITDA for the full year stood at Rs.1560 Mn vs Rs.1390 Mn up by 12% YoY
despite of 10.8% fall in revenue due to higher contribution from Liquid and Gas – B2C
segment.
It’s RPAT for FY13 stood at Rs.336 Mn up by 71% YoY due to higher other income with Net
Profit Margin at 0.8% up by 40 bps. EPS for FY13 stood at Rs.10.
The company has declared a dividend of Rs.4 for FY13, 40% dividend payout.
EXPANSION
Liquid Division - The Company has commissioned phase 1 of Haldia of 15,000 KL which is
already running at 100% capacity utilization. The remaining 45,000 KL is likely to be
commissioned by end of Q2FY14 at a total capex of Rs.480 Mn. It has also commenced
work at Pipavav for a 120,000 KL facility with a total capex of Rs.1010 Mn. This project is
likely to get commissioned by FY15. Post this expansion the company’s liquid division’s
capacity is likely to increase to 504,000 KL from the current 339,000 KL.
Gas Division – The Company is also increasing its gas division’s capacity by 10% to 25,400
MT which translates into a handling capacity of 850,000 MT from current 750,000 MT at a
capex of Rs.220 Mn. It is also widening its reach in the B2C segment with number of
operational autogas stations at 94 from 80 in FY12. It also plans to add another 41 autogas
stations by the end of FY15E.
OUTLOOK & VALUATION
We strongly believe that Aegis Logistics, India’s leading oil, gas, and chemical logistics company,
is likely to be in a sweet spot from FY14E due to spurt in volume from the high margin business
– Liquid division post expansion and Retail Autogas and Commercial cylinder business due to -
cap on subsidized cylinders and network expansion. Also, with the expiry of the options
contract in Mar’13, the volatility in earnings is also likely to reduce considerably. However,
revenue is likely to grow at a slower pace of 6% in FY14 as its wholesale low margin gas
business is witnessing short term blip because of lower offtake from National Oil Companies.
Keeping in mind subdued volumes from the wholesale segment, we have reduced our earnings
estimate for FY14E by 12% to Rs.22.6 and introduced FY15 earnings of Rs.33.8. The stock
currently trades at 6.3x and 4.2x its FY14E and FY15E EPS vs 5yr average P/E of 12x. We thus
continue to maintain our positive outlook on the company with BUY rating and a target price of
Rs.205.

52-Week blockbuster: AEGIS LOGISTICS (business line)

In the business of providing supply chain management services to the oil and gas liquid fuels market, Aegis Logistics has benefitted significantly from the turning fortunes of the oil, gas and chemicals industry.

The only listed player in this space, the stock has delivered a whopping 355 per cent over the year. Much of that however was led by PE re-rating, as its trailing twelve months per share earnings grew just by over 18 per cent (Rs 14.4 now) in the same period.

Expansion of handling capacities at its existing sites in Mumbai, likely acquisition of new sites along the coastline and lack of any significant competition in its business may have influenced the re-rating to a certain extent.

The bulk of it, however, seems to have come on the back of the company's presence in autogas retailing (sub-segment of gas division). With the government partially deregulating oil prices, the cost advantages of auto LPG have come to the fore.

It is in this regard that Aegis' 68 retail outlets and plans to increase it to 300 in the coming years puts it in a sweet spot. It has also tied up with Essar Oil to further increase in retail footprint.