Aegis Logistic Ltd - Rs 158.00
Founded in 1956, Aegis Logistic Ltd (ALL) started operations as a specialty chemicals manufacturer and supplier to the paints industry. In 1977, company diversified into liquid logistics management when it set up a port terminal in Mumbai to handle ships carrying cargo of chemicals. Later in 1994, it became India’s first company to set up a private refrigerated liquefied petroleum gas (LPG) terminal with know-how from Tractebel Gas Engineering of Germany. Today, ALL is engaged in providing integrated supply chain management services to the Indian industry which includes product sourcing, shipping, impor/export custom clearance, storing, moving and distributing petroleum products to the end user. From its headquarters in Mumbai, company serves clients all over India in the automobile, steel, glass, ceramic, petroleum, chemical, vegetable oil and petrochemical sectors. The main products handled by company are LPG, naptha, diesel, caustic soda, motor spirit, EDC etc. Company has segregated its business process into five heads namely - tank storage and terminalling, chemical distribution, gas Storage and distribution, petroleum distribution and logistics management services. Hence broadly, ALL’s business model can be divided into following two segments:
· Liquid logistic (20%): The company owns and operates one of India’s largest private sector liquid terminal located on a 20-acre plot at Trombay having storage capacity of 165,000 KL with 26 tanks of sizes ranging from 1,100 KL to 10,000 KL. During 2007 company acquired a majority stake of 75% in Adani group’s Sealord Containers Limited located at Trombay with a storage capacity of 75,000 KL. Immediately it also acquired 100% stake in Konkan Storage Private Limited at Kochi having a storage capacity of 51000 KL. So presently ALL boasts of having a total capacity of around 290,000 KL. Notably, company specializes in handling hazardous chemicals and dangerous goods classified under the Petroleum Act as Class A, B and C with IOC, BPCL, HPCL, Reliance, Supreme Petrochemicals, HLL, Jubiliant among its main customers. Ironically, due to higher profit margin almost half of the company’s profit came from this segment in FY08, although it contributed only 20% to top line. Hence considering the robust future outlook, ALL is setting up a third terminal in Trombay with a capacity of nearly 55,000 KL by FY10. Moreover company also intends to emerge as a national player and has accordingly acquired land in Haldia and Mangalore port. For future, it’s looking to have setup in Kandla and Chennai port as well.
· Gas Storage & distribution (80%): ALL imports, markets and distributes bulk propane, propylene and LPG to a variety of industrial customers in the western region and is one of the largest private sector suppliers in India. It operates a 20,000 MT fully refrigerated LPG terminal which is connected to Pir Pau Jetty by 12" low temperature steel pipelines. It also offers gas storage and handling to various LPG bulk suppliers on an open user terminal basis. Of late ALL has ventured into lucrative business of marketing and retailing of LPG thru autogas dispensing stations under the brandname ‘AEGIS Autogas’. This business is presently at the take-off stage with vehicles being increasingly converted into gas-based vehicles due to unprecedented rise in crude oil price. Intially, company is targeting only Tier 2 cities and has already opened 38 retail outlets across five states. It intends to open 100~150 such stations in next couple of years and achieve sales volume of nearly 100,000 MT of LPG thru retail sales. Importantly, it plans to set up around 90% of the stations under the dealer owned dealer operated (DODO) model, with only 10% under the company owned dealer operated (CODO) model. To conclude, the retailing business alone is estimated to contribute sales of around Rs 250~300 cr by FY10 which will boost the profit margin of company substantially.
Recently, ALL took over its 70% joint venture undertaking namely Hindustan Aegis LPG, which actually owned the refrigerated LPG terminal. Effective 01/04/2007, ALL has become the owner of that terminal. So now it doesn’t have to pay the tankage charges which it used to pay for the usage of the terminal facility. Against this acquisition company has allotted 36 lakh equity shares to the other 30% share holders of Hindustan Aegis and also absorbed approx 30 cr of debt. Fundamentally, ALL has been doing excellent and ended FY08 on quite a buoyant note with 55% rise in sales to Rs 374 cr and 65% jump in PAT to Rs 39 cr. This translates into EPS of Rs 20 on expanded equity of Rs 19.90 cr. Accordingly for FY09 it is expected to clock a turnover of Rs 450 cr and net profit of Rs 45 cr i.e. EPS of Rs 23 on current equity. Considering company’s aggressive expansion plan for LPG retailing and to have pan India presence in liquid logistic, scrip is trading extremely cheap at current market cap of less than Rs 350 cr. Investors are strongly recommended to buy at current levels and add on every declines for a price target of Rs 275 (i.e. 75% appreciation) within a year.
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