Here is my speculation about Aegis.
Projections as on 29.10.2021
- Gas logistics + liquid + new business:
o Gas logistics volumes should grow from 3mn MT in FY20/21 to 7mn MT in FY25 and EBITDA of 1000/ton should make EBITDA ~ 700 cr.
o Liquid EBITDA should increase at 10% from 173 cr. in FY21 to 250 cr. in FY25
o New business: I am assuming they get 100 cr. EBITDA from newer ventures with Vopak
o EBITDA ~ 1050 cr., assume they get 60% share (Mumbai operation is completely theirs and has higher profitability), Aegis’ EBITDA share ~ 630 cr. - Gas distribution volumes should grow from 1.65 lakh MT in FY20 to 2.5 lakh MT in FY25 translating into EBITDA of 187.5 cr. (assuming EBITDA/ton of 7000 in-line with FY21 numbers)
- Total EBITDA (Aegis’ share): 630 + 187.5 ~ 818 cr.
- EV/EBITDA: 25x implies EV ~ 20’450 cr., assuming they have 2’000 cr. net cash on balance sheet (from sale to Vopak), Mcap ~ 22’450 cr. (share price: 640)
Business quality (medium)
| Year | ROCE & ROE > 20% | Positive FCF | |||
|---|---|---|---|---|---|
| FY10 | Yes | No | Total # years | 12 | |
| FY11 | No | No | # ROCE & ROE > 20% | 3 | |
| FY12 | No | No | # Positive FCF | 5 | |
| FY13 | No | Yes | |||
| FY14 | No | No | SUM | 8 | |
| FY15 | Yes | Yes | AVERAGE | 33.33% | |
| FY16 | Yes | Yes | HIGH BUSINESS QUALITY | No | |
| FY17 | No | No | |||
| FY18 | No | No | |||
| FY19 | No | Yes | |||
| FY20 | No | No | |||
| FY21 | No | Yes |
Management quality (High)
- Organic sales growth greater than category level growth: Yes (Have grown market share in gas business)
- Able to find new avenues to grow: Yes (Built gas business from cash of liquid business, now venturing into other chemicals)
- Treats minority shareholders in a fair manner: Yes (Very good dividend payout)
- Negative points: Gave very large ESOP in FY19
Confidence in projection (Medium)
- Business quality (high/medium/low): Medium (Gas business is very high ROCE, but liquid business is 12-18% ROCE)
- Promoter quality (high/medium/low): High (Grown gas volumes faster than Indian imports + good dividend track record)
- Financial projections (high/medium/low): Medium (Gas volume projection is on the bullish side, need to continuously track progress)
- Valuation projections (high/medium/low): High (Should easily trade at 25+ EV/EBITDA, has also traded at >30x EV/EBITDA for prolonged time period)
- Is it a cyclical business (Yes/No): No (Distribution business is non-cyclical, sourcing business is more cyclical in nature)
Monitorable:
- The main story is growth in LPG volumes in distribution (from 3mn MT to 7mn MT). Monitor this
- Joker in the pack: Auto and retail business. Keep monitoring volume of LPG there
| Companies | Ticker | Projection date | Price | 4 years fwd Price (FY25) | Price return % | Dividend yield % | Total returns % |
|---|---|---|---|---|---|---|---|
| Aegis Logistics Ltd. | nse:aegischem | 29.10.21 | 211.50 | 640.00 | 31.89% | 0.95% | 32.84% |