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AVTL listing to be key near-term catalyst

* AEGIS has recently filed DRHP with SEBI for the IPO of Aegis Vopak Terminals Limited (AVTL), a JV with Vopak. In the conference call, management noted: 1) the IPO comprises a fresh issue of equity shares (FV INR10) of up to INR35b, 2) IPO proceeds will be used primarily to reduce debt, and 3) the equity issue will be in two phases and both partners will equally infuse equity.

* In 2QFY25, AEGIS reported EBITDA of INR2.2b (up 8% YoY), missing our estimate by 17% as normalized EBITDA of Liquid/Gas divisions came in 19%/16% below our estimates. Management has re-iterated its PAT guidance of 25% CAGR over the next three years, primarily led by robust upcoming capacities. AEGIS also announced that capacity expansions at Mangalore and Pipavav are nearing completion and the greenfield expansion at JNPT is nearing commissioning.

* We estimate a 13% CAGR in EPS over FY24-27E. However, the current valuations at FY26E PE of 36x and PB of 5.6x (FY26 ROE: 16.3%) are expensive. Hence, we maintain our Neutral rating on the stock with a TP of INR795, based on 35x Dec’26E EPS of INR22.7.

Soft 2Q due to weaker operating performance

* 2Q consolidated EBITDA stood at INR2.2b (+8% YoY, -4% QoQ), a 17% miss on our est. of INR2.7b.

* Normalized EBITDA of Liquid and Gas divisions came in 19%/16% below our estimates, leading to a 5% miss in reported PAT (-1% YoY) despite the lowerthan-estimated tax rate and interest costs.

* Operating expenses increased to INR15.3b (+49% YoY, +12%, QoQ).

* In 2Q, standalone revenue stood at INR6.6b (+13% YoY, -10% QoQ).

* Standalone PAT came in at INR720m (-31% YoY, -56% QoQ) amid the decrease in other income to INR354m (-38% YoY, -77% QoQ).

Segmental performance

* Liquids division’s revenue stood at INR1.3b (+11% YoY, -9% QoQ) and normalized EBITDA at INR930m (+16% YoY, -14% QoQ).

* Gas division’s revenue was INR16.2b (+45% YoY, +11% QoQ) and normalized EBITDA was INR1.4b (-5% YoY, +1% QoQ).

* In 1HFY25, net sales stood flat YoY at INR33.5b, while EBITDA/PAT grew 13%/6% to INR4.6b/INR2.6b.

* The board has approved an allocation of INR3b for investment in AVTL, to be utilized by AVTL as needed.

Valuation and View: Maintain Neutral

* AEGIS has reiterated its ambitious capex plan for: 1) the commissioning of 25,000kl at Kandla in FY25, 2) the full commissioning of 110,000kl capacity at JNPT by FY25 with partial commissioning to be announced shortly, 3) 71,000kl capacity at Mangalore to be operational in near-term, and 4) additional 25000kl capacity to be operational in FY25 at Kochi. Additionally, in the gas division, two cryogenic LPG projects at Pipavav and Mangalore are progressing on time and within budget. Additionally, land near the port has been secured for a 150,000kl storage terminal at Mumbai that was announced recently.

* While we estimate a 13% CAGR in EPS over FY24-27E, we believe that the current valuations at 36x FY26E EPS already factor in the strong expansion in capacity and earnings. We value the stock at 35x Dec’26E EPS of INR22.7 to arrive at our TP of INR795. We maintain our Neutral rating on the stock.

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