BUY Aegis Logistics - Strong throughput volumes, H2 to be better: AnandRathi Institutional Research

Aegis Logistics - Strong throughput volumes, H2 to be better; Buy with a target price of Rs 135

Lower realisations led to Aegis' Q1 revenue slipping 1.5% yoy to Rs. 7.4bn. With the ongoing capacity expansion at its gas division, throughput and sourcing volumes would be FY17 growth drivers. We retain our Buy, with no change in our estimates and target price.

Dipping segment revenues leads to overall sales drop. Due to the slow-down in gas and liquids, Aegis' Q1 revenue dipped a slight 1.5% yoy, to Rs. 7.40bn (23.2% below our estimate). Sales of the gas and liquid divisions fell respectively 0.5% and 16.2% yoy. The liquids division declined due to low chemical imports through Pipavav. The company expects throughput and sourcing volumes to improve in H2 FY17.

Operating efficiency not up to the mark. The slightly, 46bps yoy, expanded EBIDTA margin to 6.4% was due to softening commodity prices and led to a better gross margin. With the increase in throughput and sourcing volumes, margins are expected to improve.

Declining revenue and modest margins resulted in slow PAT growth. Q1 PAT rose 2.8% yoy to Rs. 260m, aided by declining interest cost (down 12.7% yoy). The gas division growth and doubling sourcing volumes would power PAT growth. The Pipavav operations ramp-up would add to profits.

Guidance. Aegis is now in discussion with Gujarat's explosives department to handle bulk petroleum products from Pipavav. This would drive revenue growth in H2. The 25,000kl expansion at Haldia and 100,000kl at Kandla are likely to come up in Q1 FY18. Also, sourcing volumes for the gas division will be doubled because of the new 8-inch LPG pipe between Mumbai and Uran. The 25,000-tonne expansion at Haldia will come up in Q1 FY18.

Valuation. Aegis has strategically located terminals for 504,000kl of liquids and 25,400 tonnes of gas, with throughput capacity of 0.9m tonnes of LPG. With ongoing expansions in both divisions, volumes are expected to increase. The stock trades at PE and EV/EBITDA of respectively 18.3x and 11.1x FY18e. We value it at 20x FY18e EPS. Risks. Currency fluctuations; higher interest rates.

Shares of AEGIS LOGISTICS LTD. was last trading in BSE at Rs.117.95 as compared to the previous close of Rs. 122.75. The total number of shares traded during the day was 65286 in over 693 trades.

The stock hit an intraday high of Rs. 123.65 and intraday low of 117.1. The net turnover during the day was Rs. 7825127.

Source : Equity Bulls

Keywords