Steady play…
Great Offshore Ltd (GOL) is the most consistent player among Indian
offshore shipping companies with a steady rise in revenue, stable
margins and steady return ratios. The company also has a sizeable
presence in the Indian offshore space with a diversified fleet of 46
vessels consisting of 28 offshore support vessels, 12 harbour tugs, three
construction barges and three drilling rigs. The company has a
successful operating track record and long-term contracts with
domestic and foreign oil exploration and drilling companies.
Stable performance to continue
We expect revenues to grow by 21% in FY12E as utilisation levels of its
drilling rigs increases. Three of its drilling rigs (Badrinath, Kedarnath and
Amarnath have secured long-term contracts and will be operating at
100% utilisation levels in FY12. The company has a slightly higher debt
equity ratio of 2.1 but this is not a concern as the ratio is expected to
improve to 1.1 by FY12 as it has completed most of its capex spend with
very marginal new capex over the next two years while the earnings from
operations are expected to rise significantly over the same period.
Valuation
We have valued Great Offshore on multiple valuation parameters and
recommend BUY with a price target of | 444.
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