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Outlook intact amid stable performance

* Aegis Logistics (AGIS) reported in-line EBITDA of INR2.1b, though its revenue was down 43% YoY due to reduced sourcing volumes and lower LPG prices in 2QFY24. However, management does not expect any significant impact of this on the company’s profit level.

* Throughput volumes surpassed the milestone of 1mmt in a single quarter for the first time in 2QFY24. Management expects throughput volumes to grow 20% YoY in FY24 driven by the ramp-up of Kandla terminal.

* A capex program of INR45b has been planned for the JV over 2023-27, which would be funded via internal accruals, debt, and some cash injections by shareholders. However, such a high and ambitious capex will burden AGIS’ balance sheet, with the focus shifting away from the LPG business, which may elevate uncertainty.

* Additionally, competition from oil marketing companies as well as private players makes the ramp-up in LPG throughput challenging.

* The stock currently trades at 19.5x FY25E EPS of INR14.5. We value the stock at 22x FY25E EPS to arrive at our TP of INR320. We maintain our Neutral rating on the stock.

EBITDA in-line but beat on PAT

* Revenue was below our est. at INR12.3b (our est. of INR22.9b, -43% YoY).

* EBITDA was in-line with our est. at INR2.1b (+24% YoY).

* Reported PAT, at INR1.3b, was 11% above our est. (+36% YoY) due to higher-than-estimated other income of INR444m (vs. INR374m in 1QFY24) and lower tax rate.

* For 1HFY24, revenue stood at INR33.4b (-24% YoY), EBITDA jumped 28% YoY to INR4b. PAT was at INR2.4b (+23% YoY)

Segmental performance

* Liquids division revenue stood at INR1.2b (+10% YoY) and EBIT was at INR593m (+20% YoY) in 2QFY24.

* Gas division revenue was at INR11.2b (-45% YoY) and EBIT stood at INR1.4b (+37% YoY) for the quarter.

Valuation and view – maintain Neutral

* Construction of India’s largest cryogenic LPG terminal with a capacity of 80,000MT at Mangalore is currently underway. Liquid capacity expansions of 50,000CBM at Kochi and 70,000CBM at Mangalore are also likely to be commissioned towards the end of FY24.

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

* The stock currently trades at 19.5x FY25E EPS of INR14.5. We value the stock at 22x FY25E EPS to arrive at our TP of INR320. We maintain our Neutral rating on the stock.

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