MOSL: AEGIS LOGISTICS (Neutral)-Recovery in Gas business delayed by the second wave of COVID
AEGIS LOGISTICS: Recovery in Gas business delayed by the second wave of COVID
(AGIS IN, Mkt Cap USD1.5b, CMP INR320, TP INR365, 14% Upside, Neutral)
- AGIS reported earnings in line with our estimates, as robust performance in the Liquids division continues to countervail the subdued Gas business.
- The Gas business was affected by the second wave of COVID-led lockdowns, with clogged ports impacting throughput volumes, while demand for Auto LPG and Cylinders (from Hotels/Restaurants) were low due to restrictions.
- The management said the Gas division would recover to pre-COVID levels in 2HFY22, with Jun-Jul’21 already seeing a bounce back in volumes. Factoring in the same, we forecast FY22E/FY23E Gas Logistics volumes at 3.2mmt/4mmt (from 3.5mmt/4.3mmt earlier) and 4.5mmt in FY24E.
- The liquids terminal at Mangalore (+50,000KL) and Haldia (+54,000kl) were commissioned in 1Q, and would contribute significantly to segmental revenue starting 2QFY22.
- AGIS has established a JV – Aegis Vopak Terminals (AVTL) – in which it will hold 51% stake, with the balance held by Vopak.
- A capex program of INR25-45b is planned for the JV over the next five years, starting FY23. It would be funded via internal accruals, debt, and some cash injection by both shareholders.
- Such a high and ambitious capex would burden AGIS’ Balance Sheet, with the focus shifting away from the LPG business, which may increase uncertainty. Considering the same, we maintain our Neutral rating with a TP of INR365 per share.
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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