AEGIS LOGISTICS: Gas logistics – Next leg of profitability
(AGIS IN, Mkt Cap USD0.9b, CMP INR189, TP INR247, 31% Upside, Buy)
We met the management of Aegis Logistics (AGIS IN) to understand the company’s growth plans. According to management, AGIS is expected to see gas throughput jump ~1.6-2.3mmtpa over the next two years (on base of 2.5mmtpa in FY19). We remain positive on the company’s gas division and reiterate Buy.
Key insights highlighted from the meeting:
Increasing reliance on LPG imports
- Over FY11-19, LPG consumption in India registered ~7% CAGR while LPG imports clocked ~14% CAGR over the same period.
- Despite ~34% (over FY11-19) increase in domestic refining capacity, percentage of imports surged to ~53% in FY19 from ~21% in FY10.
- LPG demand in India is expected to grow from ~23mmt in FY19 to ~40mmt in FY35 (a conservative estimate) supported by increased LPG penetration in the country and rise in average consumption per household.
- With Indian refiners moving towards increasing yields of higher value added products, LPG production is expected to lag the incremental demand. We estimate LPG imports to register ~6-7% CAGR over FY20-35.
Aegis Logistics Limited is a holding company, which is engaged in providing logistics and supply chain services to the oil, gas and chemical industry. The Company is engaged in the sale of liquefied petroleum gas (LPG), wholesale of solid, liquid and gaseous fuels and related products, and storage and warehousing of products, such as general merchandise warehouses and warehousing of furniture, automobiles, gas and oil, chemicals and textiles. Its segments include Liquid Terminal Division and Gas Terminal Division. The Liquid Terminal Division undertakes storage and terminaling facility of oil and chemical products. Its Gas Terminal Division relates to imports, storage and distribution of petroleum products, such as LPG and propane. It markets LPG packed in cylinders, which are used for domestic, commercial and industrial applications. It operates a network of filling plants, distribution points and dealers under the Aegis Puregas brand.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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