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Aegis Logistics
Focus has shifted away from LPG Logistics
Establishes JV with a leading global player – Royal Vopak of the Netherlands
15 July 2021
Update
| Sector:
Oil & Gas
CMP: INR343
TP: INR375 (+9%) Downgrade to Neutral
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Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
AGIS IN
334
120.3 / 1.6
394 / 179
-7/14/42
140
42.3
Financials Snapshot (INR b)
Y/E March
2021 2022E 2023E
Sales
38.4 70.9
83.5
EBITDA
3.9
5.3
6.9
Adj. PAT
2.2
3.3
4.5
Adj. EPS (INR)
6.7
9.8
13.6
EPS Gr.%
124.3 45.8
39.5
BV/Sh.INR
58.0 64.8
74.4
Ratios
Net D:E
0.0
-0.1
-0.3
RoE (%)
12.4 15.9
19.6
RoCE (%)
12.6 15.7
19.7
Payout (%)
29.9 29.9
29.9
Valuation
P/E (x)
51.2 35.1
25.2
P/BV (x)
5.9
5.3
4.6
EV/EBITDA (x)
29.5 21.0
15.7
Div. Yld (%)
0.6
0.9
1.2
FCF Yld (%)
0.7
3.7
4.0
Shareholding pattern (%)
As On
Mar-21 Dec-20 Mar-20
Promoter
57.7
58.7
59.6
DII
2.3
2.5
2.7
FII
14.8
14.3
12.5
Others
25.2
24.6
25.3
FII Includes depository receipts
AGIS has established a JV
–
Aegis Vopak Terminals (AVTL). Both LPG and liquid
storage terminals at Kandla and Pipavav, and liquid storage terminals at Mangalore,
Kochi, and Haldia have been brought under AVTL. AGIS will hold 51% stake in AVTL,
with the balance held by Vopak. AVTL will also hold the existing 250,000kl liquid
terminal of Vopak at Kandla.
AGIS, via its wholly owned subsidiary
–
Aegis Gas (AGL), used to hold 75% stake in
the Haldia LPG terminal. It is divesting 24% to Vopak (separate from AVTL).
Mumbai LPG/liquid storage terminal, gas retailing, and marine fuels remain with
AGIS. It has also retained the LPG sourcing business.
The partnership certainly opens up a host of new opportunities for the company. The
increased demand for storage facilities in India, due to rise in the production of
chemicals and petrochemicals, is expected to result in a demand for additional
storage facilities. The deal is expected to be completed by early 2022.
A capex program of INR25-45b is planned for the JV over the next five years, starting
FY23 (in the seven areas as highlighted in
Exhibit 6).
It would be funded via internal
accruals, debt, and some cash injection by both the shareholders.
Such a high and ambitious capex would burden AGIS’ Balance Sheet, with the focus
shifting away from the LPG business, which in our view may increase uncertainty.
Factoring in the same, we downgrade the stock to Neutral with a TP of INR375.
Vopak a global leader in independent tank storage
The search for a strategic partner commenced with the need for new products,
larger terminals, better inland logistics capabilities, and availability of storage
facilities at more ports and inland depots. Vopak – a global leader with 70
terminals across 23 countries, operating gas/industrial/chemical/oil terminals,
and a market capitalization of EUR5b – was the best fit.
The management said in the analyst call that the deal was valued at 23x FY22
EBITDA for the assets transferred to AVTL, while the Haldia LPG terminal was
valued broadly at the same valuation at which Itochu acquired an incremental
(~5% ) stake in the LPG terminal in Apr’21.
As per our estimates, the transaction was valued at 16x FY22E EBITDA (as
highlighted in
Exhibit 1
and
2),
while Vopak ascribes 11x FY22 EBITDA (as per
the company’s
press release).
The cash consideration also includes certain milestone payments that are tied
to the achievement of certain financial projections over the next three years.
The company expects growth in its Mumbai assets, in which it has a 100%
stake. Further growth opportunities would include VLGC compliant jetties;
further expansion of the LPG/liquid assets; multi-modal transport for LPG;
inland depots; new LPG terminals in the south; storage facilities for other gases
like ammonia, propylene, butadiene etc.; and a greenfield liquids terminal
dedicated to industrial customers.
Way ahead for AGIS and valuation
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Research Analyst - Swarnendu Bhushan-
(Swarnendu.Bhushan@MotilalOswal.com)
Sarfraz Bhimani, CFA -
(Sarfraz.Bhimani@MotilalOswal.com)