EBITDA/EPS is expected to grow at 42/51 percent CAGR over FY17-20, according to the brokerage firm.
Aegis Logistics share price rallied nearly 7 percent Thursday after brokerage house Motilal Oswal has initiated coverage with a Buy rating and valued the stock using DCF at Rs 303 per share, implying 32 percent upside.
The stock closed at Rs 244.90 on the BSE.
EBITDA/EPS is expected to grow at 42/51 percent CAGR over FY17-20, according to the brokerage firm.
"Given the various promising perspectives in AGIS' journey, we liken it to the Giant Kelp - one of the fastest growing organisms in the world and found in the waters of the Americas, South Africa, New Zealand and Southern Australia," the research house said.
The company's market cap has already grown around 25x over the last decade. However, Motilal Oswal continues believing in AGIS' structural growth story with a clear focus and strong execution in a niche market. Thus, it sees further upside potential led by its planned expansions.
AGIS is a fully integrated player in the LPG logistics chain, with operations ranging from sourcing, shipping, terminals and distribution across the industrial, commercial and auto gas segments.
Over FY17-20, Motilal Oswal expects AGIS to witness LPG throughput CAGR of 51 percent, much higher than India's estimated LPG import CAGR of 22 percent.
Post 2014, favorable macros have enabled the Indian government to increase the penetration of LPG through various schemes. This resulted in higher LPG consumption CAGR of 10 percent over FY14-17 compared to 7 percent over FY07-14. Motilal Oswal estimates LPG consumption CAGR of 15 percent over FY17-20, led by 17 percent CAGR in new household LPG connections over the same period.
India's LPG penetration increased to around 78 percent in October 2017 from less than 60 percent in January 2016. Region-wise, LPG penetration for southern and northern India stands at more than 88 percent, while that in western and eastern India (the focus areas of AGIS) lags behind at 72 percent and 60 percent, respectively.
It expects LPG import CAGR of 22 percent over FY17-20, as domestic production continues to lag demand.
Company's gas division EBITDA is expected to grow at 41 percent CAGR over FY17-20, the brokerage house feels.
For AGIS, it expects liquids throughput CAGR of 16 percent over FY17-20. Liquids division EBITDA CAGR is estimated at 22 percent over the same period, it said.
AGIS is India’s leading oil, gas and chemical logistics company. It primarily operates under two businesses: Gas and Liquids. The company operates three gas terminals and six liquid terminals across the country. It is engaged in the handling of oil & LPG products, as well as the sourcing, retailing and distribution of LPG.
At 14:45 hours IST, the stock price was quoting at Rs 244, up Rs 15.30, or 6.69 percent amid high volumes on the BSE.
