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March quarter kitchen gas Volumes have improved materially for this logistics firm, with the foreign brokerage saying in its latest note that the commissioning of the 4 million tonne per annum Kandla LPG terminal will lead to volume growth in FY13.
The brokerage has maintained ‘buy’ on the stock with a target of Rs 425, which suggests a 100 per cent potential upside. The stock had closed at Rs 213.35 on Wednesday.
Aegis is a play on liquids and LPG (Gas) logistics. Nomura said its growth in the LPG business is driven by an increase in LPG imports in India, as domestic production remains weak while the growing need for a clean cooking fuel and consumption increases with affluence.
The company’s Liquid division, which includes third party Liquid Logistics and Operations and Maintenance Services, accounted for about 33 per cent of Ebitda in the March quarter. The gas department contributed to the remaining 67 percent EBITDA. This segment includes auto gas retailing, industrial gas distribution and gas sourcing.
Nomura India said the company recently acquired new capabilities with its joint venture with Vopack, which will enable the company to enhance the products it manufactures in liquids and even ammonia and butadiene. Like new gases can also handle.
Nomura said the Kandla LPG terminal was commissioned in May, which finally paved the way for the closure of the Vopak deal despite a delay of two months.
The Kandla terminal is not only a major volume driver in the near term – Nomura estimates logistics volumes of 0.5-0.7 million tonnes in FY23 – but could also drive delivery volumes up to 10kt in FY23.
“We expect a series of announcements of development projects in industrial terminals, new products and further capacity expansion in the coming months. Note, Aegis has already completed five projects under the joint venture with a planned capital expenditure of Rs 1,250 crore. We believe that the benefits of Aegis Vopack JV are not well understood by the investors at present.”
Nomura said Aegis distribution sales already crossed 50 kt in the March quarter, and auto gas sales normalized further to pre-pandemic levels, and
With the addition of five more LPG bottling plants, the contribution could lead to a quarterly volume rate of over 40kt.
At Rs 5,000-10,000 per tonne, the profitability of the distribution segment is about 5-10 times higher than that of gas logistics. In addition, the acquisition of 0.5 million tonne per annum liquid capacity at Kandla will also support the growth in strong liquids volume, it said.
The company reported a growth of 46 per cent in net profit of Rs 102 crore for the March quarter. Revenue grew 108 per cent year-on-year to Rs 2,104 crore. While gas division Ebitda rose 22 per cent to Rs 111 crore, normalized liquid division Ebitda was flat at Rs 54 crore.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
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