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Decent performance led by a steady recovery in volumes

* AGIS reported earnings were below our estimates. Revenue was higher than our estimate, led by robust sourcing volumes in 4QFY22.

* The company recorded good traction from all three OMCs at its Mumbai and Pipavav LPG terminals. Additional jetty connectivity and construction are underway at Pipavav/Kandla terminals, with expected commissioning in Jun’22/Sep’22 (as per the management’s earlier guidance).

* It commissioned five bottling plants in FY22. It added four new stations in the Auto Gas segment, and plans to add an additional 30 more stations (in the 14 states where they are currently present) over the next two years.

* Aegis Vopak Terminals (AVTL), in which AGIS holds 51% stake and the balance held by Vopak, has agreed to proceed with five capex plans, totaling INR12.5b.

* We remain concerned about growth in the Gas logistics business (especially from the Pipavav and Kandla LPG terminal) being moved to the JV. We maintain our Neutral rating, with a TP of INR240/share.

Miss on EBITDA; robust performance in the Gas business continues

* Revenue stood at INR21b (up 108% YoY and 73% QoQ).

* EBITDA came in below our estimate at INR1.4b (up 43% YoY, but down 4% QoQ).

* PAT stood at INR947m (26% lower than our estimate; up 45% YoY, but down 7% QoQ). The tax rate was 18.7% in 4QFY22.

* In FY22, EBITDA jumped 38% YoY to INR5.3b. PAT grew 60% YoY to INR3.6b.

* The company has declared a final dividend of INR0.5/share.

Segmental performance in 4QFY22

* Revenue from the Liquids division stood at INR720m, with EBIT at INR436m (down 3% YoY, but up 22% QoQ).

* Revenue from the Gas division stood at INR20b, with EBIT at INR992m (up 20% YoY, but down 4% QoQ).

* It transferred its entire holding in Konkan Storage Systems (Kochi) Pvt. to its wholly-owned subsidiary AVTL in 4QFY22.

Valuation and view – maintain our Neutral rating

* We remain positive on LPG consumption and the import story in India (as consumption per LPG connection rises in poor households, given the government’s continued impetus) and repose our faith in AGIS’ Retailing and Distribution business. The company currently has 135 LPG stations (added four stations in 4QFY22) and plans to add 30 additional stations (in 14 states where they are present) over the next two years.

* We expect 19% CAGR in logistics volumes, with a similar logistics EBITDA CAGR over FY22-24. We expect strong free cash flow generation of ~INR9.5b in FY23-24.

* Capex of INR12.5b has been announced under the JV. AGIS trades at 14.6x FY24E EPS of INR14.9 and 8.9x FY24E EV/EBITDA. We value AGIS using the DCF methodology to arrive at a fair value of INR240/share. We maintain our Neutral rating.

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