Can you share your thoughts about the business on which you have bet the highest allocation?

Aegis Logistics Limited Q1 FY25 Analysis: Key takeaways!!

Business Outlook:

• Aegis Logistics Limited has reported its strongest Q1 performance ever, with record-breaking volumes, EBITDA, and profitability in both its gas and liquid divisions.
• The company is well-positioned to sustain the positive momentum, driven by the commissioning of new projects, expansion of existing facilities, and improved utilization across terminals.
• Aegis is dedicated to supporting India’s transition to more sustainable fuels, with plans to develop its first ammonia terminal in Gujarat.

Strategic Initiatives:

• Aegis has an aggressive capex plan of INR4,500 crores by FY’27, with nearly 50% already completed or in progress.
• The company is expanding capacity across key ports like JNPT, Pipavav, Mangalore, and Kandla, which will enhance its ability to handle higher volumes and cater to growing demand.
• Aegis is also exploring opportunities to become vertically integrated in the ammonia business, similar to its strategy in the LPG business.

Trends and Themes:

• The strong performance is driven by the continued growth in volumes at the Kandla terminal and the addition of new capacity across various terminals.
• The liquid division’s EBITDA grew by 38% year-on-year, reflecting the positive impact of new capacity additions and acquisitions.
• The LPG division witnessed a 7% growth in EBITDA, aided by a 15% increase in logistics volumes.

Industry Tailwinds:

• The Indian energy sector is witnessing a transition towards cleaner fuels, driven by government policies and environmental concerns, which bodes well for Aegis’ focus on sustainable energy infrastructure.
• The growing demand for LPG and the need for efficient handling and distribution infrastructure provide ample opportunities for the company to capitalize on.

Industry Headwinds:

• Aegis’ distribution segment saw a decline in volumes, which the management attributed to the temporary reduction in natural gas prices by Gujarat Gas. However, the company expects this to be reversed going forward.

Analyst Concerns and Management Response:

• Analysts raised concerns about the discrepancy between Aegis’ LPG volume growth and the national import growth, which the management clarified is due to the exclusion of private imports in the national data.
• The management reiterated its confidence in maintaining a 25% CAGR in throughput volumes over the next few years, driven by the ramp-up of the Kandla terminal and the commissioning of new capacities.

Competitive Landscape:

• Aegis faces competition from other terminal operators, but the management emphasized its focus on operational efficiency, safety, and cost-effectiveness, which it believes will keep the company competitive.
• The management also highlighted the company’s strong partnerships and experience in the industry as a key differentiator.

Guidance and Outlook:

• Aegis guided for a 25% CAGR in revenues and profitability over the next 3 years, supported by the new capacities coming online and the ramp-up of existing terminals.
• The management expressed confidence in the company’s ability to maintain its earnings growth momentum, leveraging the benefits of its investments in both the terminaling and distribution businesses.

Capital Allocation Strategy:

• Aegis has a robust capital allocation strategy, with a focus on expanding its asset base through greenfield and brownfield projects.
• The management indicated that the pace of capital spending is expected to persist beyond FY’27 as the company explores further opportunities in its pipeline.

Opportunities & Risks:

• Opportunities: The growing demand for cleaner fuels, the need for efficient handling and distribution infrastructure, and the company’s ability to capitalize on these trends.
• Risks: Potential delays in the completion of expansion projects, regulatory changes, and competition from new entrants.

Regulatory Environment:

• Aegis operates in a heavily regulated industry, and the management highlighted the importance of securing necessary permits and approvals from regulatory authorities for its upcoming projects.

Customer Sentiment:

• The company’s focus on operational efficiency, safety, and cost-effectiveness has helped it maintain strong relationships with its customers, including national oil companies and other distribution companies.

Top 3 Takeaways:

1. Aegis Logistics Limited has reported its strongest Q1 performance ever, with record-breaking volumes, EBITDA, and profitability.
2. The company is well-positioned to sustain the positive momentum, driven by its strategic initiatives, including aggressive capacity expansion and diversification into sustainable energy infrastructure.
3. Aegis has a robust capital allocation strategy and a confident outlook, aiming to achieve a 25% CAGR in revenues and profitability over the next 3 years.

I see that the current market conditions are not good for either stocks. I am not following them closely as of now.

Regarding rain, I was invested in it earlier but once they raised debt at 10 percent interest rate in us dollar terms (and market conditions weren’t good), I exited it. It’s a very high interest rate to pay and it’s interest expenses are about 1000 cr per year.

Both should do good once the market cycle reverts for them but I have no visibility regarding it. (Market cap to sales is quite cheap for rain(but high debt) and decent for hil, considering its debt free)

As of now, I am mostly invested in banking sector. Paper industry seems good, but cycle is on downside so again very risky, not invested in it.

Does anyone know when will the capex be completed?