Supply Chain

IIFL Securities Report: Aegis Logistics Set to Scale Up Fast with Attractive Valuations

Aegis Logistics: Well-Established Franchise Positioned for Strong Growth

By Business OutstandersPUBLISHED: April 3, 17:35

Aegis Logistics (Aegis) is a leading provider of liquid and gas cargo logistics services in India with existing storage capacity of 1.9 million kiloliters and 9.6 million metric tons across seven strategic locations. Analysts from IIFL Securities forecast the company's volumes to grow at an annualized rate of 17-35% through fiscal year 2026, leading to annualized earnings per share growth of approximately 19% supported by attractive cash flows and return on capital employed. The induction of Vopak, a global leader in liquid and gas logistics, as a 49% strategic partner has de-risked Aegis' business model while further strengthening its competitive position. The current valuation appears attractive, leading analysts to initiate coverage with a Buy rating.

Scaling an Proven Business Model

Aegis specializes in liquid and gas cargo storage and logistics services. The company's competitive advantages include establishing storage terminals at low cost locations strategically connected via pipelines and offering quality services at competitive rates. Aegis has consistently generated EBITDA margins between 60-90% for its liquid and gas storage businesses along with high operating cash flow conversion and attractive returns on capital employed ranging from 13-24%. Over the past decade, Aegis has invested over Rs. 25 billion to develop 1.4 million kiloliters of liquid storage and 8.9 million metric tons of gas handling capacity while registering annual EBITDA and profit after tax growth of 23% and 25%, respectively. Strong economic growth and increasing focus on cleaner energy solutions bode well for continued expansion in the liquid and gas logistics sector. Aegis plans to scale up its liquid and gas handling capacity by 83% and 104%, respectively, through fiscal year 2026 by investing approximately Rs. 45 billion.

Earnings Growth Driven by Volume Increases

Analysts from IIFL Securities forecast Aegis' EBITDA and profit after tax to grow at annualized rates of 28% and 19%, respectively, from fiscal years 2024 through 2026 supported by anticipated volume increases of 35%, 43%, and 17% for liquids, gas storage, and gas distribution, respectively, along with stable unit margins across business segments. Upside potential exists given Aegis' expansion into higher margin cryogenic storage terminals. EBITDA contribution from liquid and gas handling and gas distribution is projected to shift to 35%, 48%, and 17%, respectively, by fiscal year 2026 compared to current levels of 35%, 43%, and 21%. Operating cash flows and return on capital employed are expected to average Rs. 6-12 billion and 16-18%, respectively, reflecting strong asset utilization. Earnings growth depends on the timely completion of upcoming facilities in Haldia, Mangalore and other liquid terminals scheduled for fiscal year 2026 with any project delays posing a key risk.

Initiate Coverage with Buy Rating

At the current market price, Aegis trades at a fiscal year 2026 price to earnings multiple of approximately 19x, one standard deviation below its ten-year average. Strong projected earnings growth, improving cash flows and returns warrant stock price re-rating over the next 12-18 months in analysts' view, leading them to initiate coverage with a Buy rating while noting project execution risk.​

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