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Aegis Logistics: Maintaining traction - Views on News from Equitymaster

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Aegis Logistics: Maintaining traction
Jun 2, 2008

Performance summary
  • Consolidated topline grows by 62% YoY for the full year, led mainly by the gas terminal business

  • Operating margins have expanded by 510 basis points whereas EBIT margins have come in higher by 360 basis points, again led by improved margins of the gas terminal business

  • Net profits have grown by 78% YoY, lower than the 128% growth in EBITDA, owing to greater than proportionate rise in depreciation, interest expense and tax outgo

  • Recommends a dividend of Rs 2 per share for the full year FY08 (div yield of 0.8%)

(Rs m) FY07 FY08 Change
Net sales 2,404 3,893 61.9%
Expenditure 2,105 3,210 52.5%
Operating profit (EBDITA) 299 683 128.3%
EBDITA margin (%) 12.4% 17.5%  
Other income 29 23 -20.6%
Depreciation 38 120 213.8%
EBIT 261 563 115.7%
EBIT margin (%) 10.8% 14.5%  
Interest (net) 32 89 175.9%
Profit before tax 257 496 92.9%
Tax 42 112 168.0%
Profit after tax/(loss) 216 384 78.4%
Net profit margin (%) 9.0% 9.9%  
No. of shares (m) 16.3 19.9  
Diluted earnings per share (Rs) 10.8 19.3  
Price to earnings ratio (x)   12.4  

What has driven performance in FY08?
  • Both its segments viz. liquid terminal business and the gas terminal business have done well during the year, growing by 40% YoY and 68% YoY respectively. While the growth in the former was led by capacity expansion, growth in the gas terminal business could be attributed to increased roll out of auto gas stations.

    Segmental break up…
    Segment FY07 FY08 % change
    Liquid terminal      
    Revenues 488 683 40.1%
    PBIT 267 340 27.6%
    PBIT margin 54.7% 49.8%  
    Gas terminal      
    Revenues 1,916 3,209 67.5%
    PBIT 100 345 245.4%
    PBIT margin 5.2% 10.7%  

  • As far as segmental margins are concerned, owing to better margins in the auto gas space, margins for the gas terminal division witnessed an expansion 550 basis points (5.5%). Liquid terminal business on the other hand saw its margins erode by 490 basis points (4.9%) during FY08. This was mainly because of a higher depreciation from the company’s two terminals at Trombay and Kochi. With the capacity expansion improving at these terminals, we expect the depreciation charges to come down as a percentage of sales.

  • Interest expenses have come in higher by a significant 176%, once again led by expansion in the liquid terminal business. Higher taxes on the other hand are a result of greater contribution from the auto gas business, where tax rates are higher than the company’s other businesses. Consequently, growth at the operating level has not percolated down fully to the bottomline level, leading the latter to grow at a slightly lower rate of 78% YoY for the full year.

What to expect?
At the current price of Rs 230, the stock is trading at 6.4 times our estimated FY10 earnings of the company. The company’s FY08 EPS has come in 6% higher than our estimates owing to better than expected performance in the gas terminal business. While we remain confident of the company’s growth prospects, if petrol prices remain artificially low, then the auto gas business might come under pressure, a fact that has been highlighted by the company as well. However, since the situation has yet not reached a stage so as to drastically reduce our EPS estimates, we maintain our positive stance with respect to the stock

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