Neutral Aegis Logistics; target of Rs 330: Motilal Oswal

Motilal Oswal recommended Neutral rating on Aegis Logistics with a target price of Rs 330 in its research report dated July 27, 2023.

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July 31, 2023 / 21:53 IST

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Motilal Oswal's research report on Aegis Logistics

Aegis Logistics (AGIS) reported marginally higher-than-estimated EBITDA of INR2.0b (est. INR1.8b; up 34% YoY, down 3% QoQ) due to 86% YoY (17% QoQ) increase in distribution volumes in 1QFY24. Distribution volumes clocked a record high of 159tmt during the quarter because of industrial players switching to LPG/propane. Management expects industrial LPG growth to remain healthy despite competition from natural gas. This is because the proportion of dirty fuels in industrial is still very high in India and there is room for both natural gas and LPG to grow simultaneously. Despite sequential growth in gas division volumes, normalized EBITDA for gas division declined 8.2% QoQ due to high proportion of lower-margin bulk LPG in volume mix in 1QFY24. 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 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, competition from oil marketing companies as well as private players make the ramp-ups in LPG throughput challenging.

Outlook

The stock currently trades at 27.1x FY24E EPS of INR13.7. 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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