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Strong gas division performance drives a beat

* Aegis Logistics' 1QFY27 revenue came in 26% above our estimate at INR23.6b, while EBITDA came in 71% above our estimates at INR7.1b, translating into an EBITDA margin of 30.3% (vs 14% in 1QFY26). PAT came in significantly above our estimate at INR4.8b (our est.: INR2.4b). Segmentally, the Liquids division reported revenue/EBIT of INR1.8b/INR1.1b (+24%/+36% YoY), while the Gas division reported revenue/EBIT of INR21.8b/INR5.8b (+38% YoY/4.3x YoY).

* Key things we liked about the result:

1) Gas distribution EBITDA/mt has sustained at ~INR7,000+ levels for the past two quarters (vs. historical levels of ~INR4,000). Further, the management believes margins can remain around current levels even under a normalized energy price environment as volumes continue to scale.

2) The 36,000mt ammonia storage terminal at Pipavav was commissioned in 1QFY27, and the company plans to commence industrial ammonia distribution within a week.

3) At JNPA, the Board has also approved a 52,000mt refrigerated double wall steel LPG tank.

4) At Kandla, the KandlaGorakhpur pipeline is expected to become operational by 1HFY27, while the Jamnagar-Loni pipeline is already complete, alongside an additional 94,000kl of liquid capacity under development.

5) At Kochi, the Board has approved an additional 49,577cbm of capacity, expected to be commissioned by early FY28.

6) At Mangalore, the company has secured land to develop an additional 60,000cbm of capacity.

7) At Haldia, three acres of land were acquired to expand terminal capacity, with existing LPG capacity backed by an exclusive terminalling agreement with HPCL through 2038.

* Key monitorables:

1) Government initiatives promoting PNG adoption and reducing LPG dependence could potentially moderate long-term LPG demand growth.

2) With a substantial portion of the USD5b investment pipeline likely to be deployed during FY29-31, project execution, funding mix and leverage trajectory remain key monitorables.

* Valuation and view:

The stock has run up significantly in recent months, primarily driven by the strength in the LPG distribution segment margin. While we remain constructive on capacity addition and utilization increase-led growth, valuations are not inexpensive. We increase our LPG distribution EBITDA/mt margin assumption to INR6,000/5,000 for FY27/28 and reiterate our Neutral rating on the stock with a TP of INR1,230, as we now value the company at 35x Dec’27E EPS of INR35.1.

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