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Other income boosts profitability
Shipping Corp of India’s (SCI) Q2FY11 result was better
than-expectations on back of strong performance across
segments and profit from sale of ships. SCI’s EBIDTA
margin improved 10.5 percentage points YoY to 23.0%.
The liner segment continued to report profits with
healthy growth. SCI has filed the DRHP with the market
regulator proposing a follow-on public offer (FPO) to
raise funds during the current fiscal. We believe the
stock is fairly valued and maintain Hold.
Strong Q2 performance: Though Q2FY11 revenue was
flat at Rs8,764mn, up 3.7% YoY, net profit jumped
643.7% YoY on back of better performance across
segments and profit from sale of ships. Bulk segment’s
revenue grew 14.5% YoY to Rs6,732mn, liner revenue
increased 34.1% YoY to Rs2,894mn and others reported
a 27.5% YoY growth to Rs598mn.
Other income boosts profitability: Net profit for Q2
jumped 643.7% YoY and 30.9% QoQ to Rs2,506mn, on
back of profit form sale of ships. SCI sold two product
tankers and four crude oil carriers during Q2FY11
resulting in a profit of Rs1,280mn, thus boosting overall
profitability.
Trading at fair value; maintain Hold: We value SCI at
1x FY12 book value and maintain our target price of
Rs168. Though we are positive on SCI’s business
portfolio mix and the strong performance during
H1FY11, we believe that the stock appears fully valued
at the current valuation of 1.1x FY12E P/BV and do not
leave room for any further upside.
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