Review from Ventura
Aegis Logistics Ltd (AEGIS) is fast emerging as a large-scale LPG player in India and its tie-up with Royal Vopak (Netherlands) and Itochu Corporation (Japan) stands it in good stead to roll out its ambitious plan in the LPG space. Prior to getting into the LPG space, AEGIS has been providing logistics and storage services for chemical and petroleum products. Climate change demand and stringent orders from the National Green Tribunal (NGT) in Gujarat and Delhi/NCR to use clean fuels have led to an increase in the demand for LPG. This trend is expected to grow in future as similar restrictions are likely to be implemented in other industrial zones across India, thereby driving the demand for LPG. In addition, LPG’s cost-effectiveness compared to industrial natural positions it as a viable sustainable fuel option. During FY16-23, AEGIS’s LPG volumes grew at a CAGR of 14.4%, reaching 3.94 mn tonnes. By FY26 we expect these volumes to be 7.0 mn tonnes (21.1% CAGR) driven by ~INR 3,500 cr capex. There exists an upside risk to our capacity estimates given that AEGIS is looking to acquire existing capacities from inefficient and unviable peers who may be looking for an exit. Strong volume growth and relatively steady EBITDA margins of ~INR 1,000 per tonne (logistics) and ~INR 3,500 per tonne (distribution & retailing) make it a lucrative franchise.
AEGIS is undertaking a ~INR 1,500 cr capex on its logistics and storing services for its chemicals and petroleum products vertical. Given the strong demand drivers, we expect the revenues of this division to grow at a CAGR of 12.0% to INR 587 cr by FY26. AEGIS is also expanding its services to include the storage of green ammonia and it is constructing an 80,000 MTPA capacity in Odisha.
Overall, although the revenue is expected to be flat at INR 8,287 cr (based on current LPG pricing), EBITDA is expected to grow at CAGR 22.3% to INR 1,228 cr with 14.8% margins (+703bps) by FY26, while net earnings are expected to grow from INR 463 cr in FY23 to INR 725 cr (CAGR of 16.1%) with 8.7% margins (+338bps).
In our opinion, AEGIS is a solid de-risk proxy play on India’s infrastructure growth story and we initiate coverage with a BUY with a price target of INR 516 per share representing an upside of 47.9% from the CMP.