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Throughput declines but management optimistic in the near term

* Aegis Logistics (AGIS) reported a lower-than-estimated EBITDA of INR2.0b (est. INR2.3b; up 42% YoY, down 6% QoQ) due to lower volumes in 4QFY23.

* Gas division posted 88% YoY revenue growth in FY23 driven primarily by 61% YoY growth in sourcing volume. However, management highlighted that the sourcing division contributes very little to EBITDA due to its slender margin of ~USD1/mt.

* Although LPG terminalling throughput declined 11% QoQ in 4QFY23, management expects throughput to reach ~4mmt in FY24 from ~3.3mmt in FY23 driven by ramp-up of Kandla terminal. The Kandla terminal’s exit runrate throughput stood at around 70,000mt/month at end-4QFY23.

* A capex program of INR45b has been planned for the JV over 2023-2027, which would be funded via internal accruals, debt, and some cash injection by both shareholders. However, such a high and ambitious capex will burden AGIS’ balance sheet, with the focus shifting away from the LPG business that may elevate uncertainty.

* Additionally, competitions from oil marketing companies as well as private players make the ramp-ups in LPG throughput challenging.

* The stock currently trades at 24.5x FY24E EPS of INR14. We value the stock at 22x FY25E EPS of INR15 to arrive at our TP of INR330. We maintain our Neutral rating on the stock

Miss on EBITDA but PAT beat estimates

* Revenue was in line with our est. at INR21.5b (+2% YoY, +3% QoQ) in 4Q.

* EBITDA was 10% below our est. at INR2b (+42% YoY, -6% QoQ) due to lower volumes.

* Reported PAT was 10% above our est. at INR1.4b (+49% YoY, +12% QoQ) driven by higher other income of INR637m (v/s INR192m in 3QFY23).

* The Board declared a final dividend of INR1.25/share. Total dividend for the year stood at INR5.75/share.

* For FY23, Revenue stood at INR86.3b (+86% YoY), EBITDA jumped 37% YoY to INR7.3b. PAT was at INR4.6b (+29% YoY)

Segmental performance in 4QFY23

* Liquids division’s revenue came in at INR1.2b (+62% YoY, +2% QoQ), while EBIT stood at INR528m (+56% YoY, +13% QoQ).

* Gas division’s revenue was at INR20.4b (flat YoY, -3% QoQ) and EBIT stood at INR1.4b (+36% YoY, -7% QoQ).

Valuation and view – maintain Neutral

* The company has commenced construction of India’s largest cryogenic LPG terminal with a capacity of 80,000MT at Mangalore. Liquid capacity expansions of 50,000CBM at Kochi and 70,000CBM at Mangalore are also expected to be commissioned towards the end of FY24.

* With already increased penetration of LPG, the threat of PNG-domestic over a longer term becomes credible. Industrial demand of LPG has several operational difficulties and natural gas is always preferred if economical. Hence, long-term growth remains a concern.

* The stock currently trades at 24.5x FY24E EPS of INR14. We value the stock at 22x FY25E EPS of INR15 to arrive at our TP of INR330. We maintain our Neutral rating on the stock.

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