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Aegis Logistics: Sales down, profits up - Views on News from Equitymaster
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Aegis Logistics: Sales down, profits up
Aug 20, 2009

Performance summary
  • Revenues decline by 40.2% YoY during 1QFY10, mainly on account of poor performance of the gas terminal division.
  • Steep decline in cost of operation leads to 8.7% expansion in EBITDA margins.
  • Despite lower operating profits (2.3% YoY), bottomline reports 13.7% YoY growth. This is mainly on account of more than five-fold growth in other income and lower interest charges.

Financial performance snapshot
(Rs m) 1QFY09 1QFY10 Change
Net sales 1,152 689 -40.2%
Expenditure 994 535 -46.2%
Operating profit (EBITDA) 158 155 -2.3%
EBITDA margin 13.7% 22.4%  
Other income 4 23 451.2%
Interest 27 23 -14.0%
Depreciation 35 36 2.3%
Profit before tax/(loss) 100 118 17.8%
Tax 20 27 33.8%
Profit after tax/(loss) 80 91 13.7%
Net margin 6.9% 13.2%  
No of shares (m) 19.9 19.8  
Diluted EPS (Rs)*   14.4  
P/E (times)   8.5  
*trailing twelve month earnings

What has driven performance in 1QFY10?
  • Aegis Logistics reported 40.2% YoY decline in 1QFY10. This is mainly on account of lower gas prices that impacted gas terminal division sales. The gas terminal division that contributes over 70% to the topline reported 48% YoY decline in revenues. Lower LPG prices negatively impacted the gas distribution business of the company. On the other hand, liquid terminal division reported stagnant growth, 0.1% YoY.

  • The company has not divulged volumes numbers. So it would be difficult to comment on the impact of the same. However, 4QFY09 performance of the company was impacted by drying up of volumes apart from lower prices. Softening of crude prices and credit crisis that struck hard around the same time impacted trade and hence growth of the company. Price scenario has not changed in the company’s favour. Considering the management discussion about the 4QFY09 performance, we decipher that volume growth must have not improved in 1QFY10.

  • Cost of operation exceeded the fall in topline resulting into 8.7% expansion in EBITDA margins. The lower LPG prices impacted topline but also supported margins. The sharp fall in consumption of raw materials resulted in margin expansion. Barring raw material costs, all the other cost heads have expanded as a percentage of sales basis as well as in absolute terms.

  • Despite 2.3% YoY fall in operating profit, profit before tax (PBT) grew by 17.8% YoY. This is largely on account of more than fivefold growth in other income. Excluding the same, PBT has declined marginally, 0.6% YoY.

  • Net profit reported 13.7% YoY growth during the period under consideration. As compared to PBT, growth in bottomline has come in at a slower pace on account of higher tax outgo. Had it not been for higher other income, net profits would have been impacted negatively in line with PBT.

What to expect?
At the current price of Rs 122, the stock is trading at 8.5 times its trailing twelve month earnings. Volatile gas prices in the international markets, unstable global economic environment that impacted volumes and sharp fluctuation in rupee against the dollar did impact the company’s performance negatively in the past few quarters. The company is present in a niche segment of oil and gas logistics and is a leading player in the third party logistics segment in India. There is enough scope for growth in this space considering the energy needs of the country. With the volatility in fuel prices and currency fluctuations showing signs of moderating and given the opportunities, the company is likely to witness improvement in profitability going forward.

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