Aegis Logistics Limited - Aegis Logistics Limited Company Profile Aegis is a leader in terminalling

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    AEGIS LOGISTICS LTD

    Aegis Logistics Limited

    Company Profile

    Aegis is a leader in terminalling of oil products, chemicals and liquefied gases, sourcing of LPG and retailing and distribution of LPG. Company’s strategy is of building a necklace of port terminals around India’s coastline. Aegis with its strategi- cally located facilities is well placed to benefit from the rising LPG & chemical. Cur- rently Mumbai, Haldia and Kochi ports handle cumulatively ~30% of India’s POL volume and the Pipavav facility caters to the chemical belt in Gujarat.

    Investment Rationale

    Leading Liquefied Petroleum Gas (LPG) Sourcing Player with complete value chain of Gas Logistic - Aegis is India’s leading LPG sourcing company, present in the com- plete logistics value chain starting from sourcing, shipping, terminals and distribution across the industrial, commercial and auto gas segments. In order to strengthen its sourcing capabilities the company has recently tied up with one of the largest sourc- ing company in the world – Itochu.

    Recently, Aegis has sold19.7% stake in its wholly-owned subsidiary Hindustan Aegis LPG Company Ltd (HALPG) - under which its Haldia LPG terminal is housed - to an arm of Japanese trading company Itochu Corporation i.e. Itochu Petroleum Co (Singapore) Pte Ltd for INR 250 crore ($38.75 million) valuing HALPG at INR 1,269 crore. Aegis will use the proceeds to accelerate its capex programme for the next cycle of LPG import terminals after Haldia.

    Liquid terminal – cash cow which drive margin - The liquid terminal is a high margin (~50%) business for Aegis and the incremental capacity addition have help ramp up the overall profitability of the company. Aegis’s three projects in liquid terminal, which involve 100,000 kiloliters expansion in Kandla, Mangalore 25,000 kiloliters and 35,000 kiloliters in Haldia, are expected to start generating revenues and profits in the second half of the FY19, which will give significant boost to its earnings & cashflow.

    Valuation

    With major capex behind, we expect strong free cash flow generation. Going for- ward, we expect margins to remain firm with increasing proportion of high margin businesses and also expect EBIDTA of the company to grow at a CAGR of 25.2% during FY17-FY20E. At the CMP of INR 215.45, the stock is trading at EV/EBITDA and P/E of 17.4x and 22.0x respectively. We value Aegis using DCF methodology, with WACC of 13.6% and terminal growth of 3.5% to arrive at a fair value of INR 282 per share, implying an upside of 31%. Thus, we initiate coverage on this stock with a Buy recommendation.

    Market Data

    Face Value (INR) 1.0

    Equity Share Capital (cr) 33.4

    Share Outstanding (cr) 33.4

    Market Cap (INR cr) 7,196.0

    Book Value / share 36.1

    Daily Avj. Volume 1,35,712

    52 W High 300.8

    52 W Low 170.0

    Shareholding %

    Promoter 60.5

    Foreign 11.4

    Institutions 2.8

    Public & Others 25.3

    Sensex and Stock Movement

    FY 2016 FY 2017 FY 2018 FY 2019E FY 2020E

    Net Sales 2,213 3,930 4,791 5,898 6,956

    EBDITA 194 209 274 333 410

    PAT 113 133 214 253 326

    EPS (INR) 3.4 4.0 6.4 7.6 9.8

    P/E (x) 28.6 49.0 40.7 28.3 22.0

    Dinesh Gupta +91 22 30272867 dinesh.gupta@dalmiasec.com

    Lohit Bharambe +91 22 30272866 lohit.bharambe@dalmiasec.com

    RATING: BUY

    Target: 282

    Upside: 31%

    CMP : 215.45 ( As on 16/10/2018)

    Reuter Code : AEGS.NS

    Bloomberg Code : AGIS IN

    Source - DSPL Research, Company

    mailto:subrata@dalmiasec.com mailto:subrata@dalmiasec.com

  • AEGIS LOGISTICS LTD

    2 F i -

    Company Profile

    Aegis Logistic Ltd (Aegis) is engaged in the terminalling of oil products, chemicals and liquefied gases, sourcing of

    LPG and retailing and distribution of LPG. Aegis business can be divided into two – liquid storage and gas. Compa-

    ny’s strategy is of building a necklace of port terminals around India’s coastline of India. The company operates three

    gas terminals and six liquid terminals across the country.

    Unique Infrastructure

    Source – Company, DSPL Research

    Liquid Terminal - As on August 2018

    Location Capacity (in KL)

    Mumbai 2,73,000

    Haldia 1,20,190

    Pipavaa 1,20,120

    Kandla 1,00,000

    Kochi 51,000

    Mangalore 25,000

    Total 6,89,310

    Gas Terminal - As on August 2018

    Location Static Capacity

    in MT Throughput Capacity

    in MT

    Haldia 25,000 25,00,000

    Mumbai 20,000 11,00,000

    Pipavav 18,300 14,00,000

    Total 63,300 50,00,000

  • AEGIS LOGISTICS LTD

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    Subsidiary Companies

    Key Management

    Name Designation

    Raj K Chandaria Chairman & Managing Director

    Anish K Chandaria Vice Chairman & Managing Director

    A M Chandaria Director

    Kanwaljit S Nagpal Director

    Raj Kishore Singh Director

    Jaideep Dinesh Khimasia Independent Director

    Ms. Tanvir Koreishi Independent Director

    Rahul Asthana Independent Director

    Murad M Moledina Chief Financial Officer

    Ms. Monica Gandhi Company Secretary (Compliance Officer)

    Source – Company, DSPL Research

    Name of Entity Nature of Business Place of

    Incorporation % of

    Holding

    FY 2018 Turnover Share

    (%)

    FY 2018 PAT Share (%)

    Parent:

    Aegis Logistics Standalone Terminalling,

    Wholesale LPG Distribution India 100.0% 10% 47%

    Subsidiaries: Foreign

    Aegis Group International Pte. Limited Trading of LPG Singapore 60.0% 85% 12%

    Aegis International Marine Services Pte. Limited Trading of bunker fuels Singapore 100.0% 0% 0%

    Subsidiaries: Indian

    Aegis Gas (LPG) Private Limited Storage services & Trading

    of LPG India 100.0% 3% 26%

    Sea Lord Containers Limited Storage services India 92.5% 1% 19%

    Hindustan Aegis LPG Limited Storage services India 80.3% 1% 5%

    Konkan Storage Systems (Kochi) Private Limited Storage services India 100.0% 0% 0%

    Eastern India LPG Company Private Limited Storage services India 100.0% 0% 0%

    Aegis LPG Logistics (Pipavav) Limited Storage services India 100.0% 0% 0%

    Aegis Terminal Pipavav Limited Storage services India 100.0% 0% 0%

    Effect of intercompany adjustments / eliminations

    -9%

    Source – Company, DSPL Research

  • AEGIS LOGISTICS LTD

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    Investment Rationale

    Leading Liquefied Petroleum Gas (LPG) Sourcing Player with complete value chain of Gas Logistic - Aegis is India’s

    leading LPG sourcing company, present in the complete logistics value chain starting from sourcing, shipping, termi-

    nals and distribution across the industrial, commercial and auto gas segments. In order to strengthen its sourcing ca-

    pabilities the company has recently tied up with one of the largest sourcing company in the world – Itochu Petroleum

    co (Singapore) Pte Ltd (Itochu).

    Aegis operates three LPG terminals at key ports in India, with a static capacity of 63,300 mt and a throughput capaci-

    ty of 50,00,000 mtpa. In the gas sourcing business the company gets a spread on $3-5 per MT. The terminal busi-

    ness generates revenues of Rs 700-1,000 per MT.

    India is the world’s second largest importer of LPG (liquefied petroleum gas) after China and remains ahead of Japan.

    As the government’s drive to provide clean cooking fuel to millions of poor families boosted household demand by

    nearly 8% in 2017-18. Further, with the rationalization of LPG subsidies resulting in a decrease in the diversion of

    subsidized LPG to the transport and commercial sector. Deregulation of the oil sector will lead to new entrants in pe-

    troleum retailing and bulk marketing — requiring the need for integrated logistics services. Aegis being the largest

    private importer of LPG, is expected to be the biggest beneficiary of rising LPG imports in the country.

    Source – Company, DSPL Research

    Gas Terminal - As on March 2018

    Location Static Capacity

    in MT Throughput Capacity

    in MT

    Haldia 25,000 25,00,000

    Mumbai 20,000 11,00,000

    Pipavav 18,300 14,00,000

    Total 63,300 50,00,000

    Source – Company, DSPL Research

  • AEGIS LOGISTICS LTD

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    Aegis distributes its gas which is used by industrial, commercial and auto users through a diversified network. The

    company has 133 distributors in 45 cities across eight states, who sell commercial and industrial LPG. Commercial

    gas is sold under the brand ‘Aegis Puregas’. Auto gas is sold under the brand ‘Aegis Autogas’ through 109 Auto gas

    stations, which the company intends to expand to ~130 stations over the next two years. Aegis has opted for a mod-

    erate pace of growth for its Auto gas venture adding one gas station every month.

    Recently, Aegis has sold19.7% stake in its wholly-owned subsidiary Hindustan Aegis LPG Company Ltd (HALPG) - un-

    der which its Haldia LPG terminal is housed - to an arm of Japanese trading company Ito