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Essar Shipping- Encouraging performance…
Essar Shipping Ports and Logistics Ltd (Essar Shipping) reported an
encouraging performance with a 26% QoQ rise in topline due to an
improved performance from the ocean transport business. The company
currently operates two ports at Vadinar (46 MTPA wet cargo) and
Hazira (30 MTPA dry cargo) with a combined operational capacity of 76
MTPA, which is expected to get ramped up to 158 MTPA over the next
two years with the establishment of three new ports/berths. However,
there has been a delay in the construction of two new jack up rigs,
which will lead to a delay in earnings from oilfield services business.
Improved performance in Q3FY11
Essar Shipping reported a 26% QoQ rise in revenue at | 819 crore, which
was mainly on account of a rise in earnings from the ocean transport
division of the company, which increased QoQ from | 276 crore to | 347
crore. The oilfield services business reported a 7% decline in revenue
from | 99 crore to | 92 crore as its semi submersible rig earned slightly
lower charter rates. Earnings from the ports and terminal business
increased by 2% from | 173 crore to | 177 crore. In the nine months,
Vadinar and Hazira combined handled 29.3 MT of cargo. With the rise in
dry bulk volumes at the Hazira port, earnings from the port business are
expected to increase significantly, going forward. The operating margin
increased from 31.1% to 36.5% QoQ with EBITDA of | 299 crore. The
company reported a 149% rise in PAT QoQ to | 27 crore in Q3FY11.
Valuation
At the CMP of | 98, the stock is trading at 26.9x FY12E EPS of | 3.6 and
0.67x FY12E book value of | 145. We have valued each division on a DCF
basis to arrive at price target of | 100 and recommend ADD rating.
Essar Shipping offers a diversified play with a presence in the shipping,
logistics and ports business. In the last few years, the company has
ramped up its presence in the port and terminal business with the
commissioning of Vadinar port (46 MTPA wet cargo) and Hazira (30 MTPA
dry cargo) port. However, we expect the performance from the ocean
transport business to be subdued on account of weakness in freight rates.
Further, there has also been a delay in the construction of two new jack
up rigs by ABG Shipyard, which will be delivered in Q4FY12 and Q2FY13.
This will lead to a delay in earnings from the oilfield services business.
At the CMP of | 98, the stock is trading at 26.9x FY12E EPS of | 3.6 and
0.67x FY12E book value of | 145. We have valued each division on a DCF
basis to arrive at price target of | 100. We recommend an ADD rating to
the stock.
Exhibit 1: Valuation parameter
Business DCF/Rs
Sea and Surface Transport Business 17
Oilfield Services Business 15
Ports & Terminal
VOTL & VPTL 19
Hazira Bulk Terminal 33
Salaya Bulk Terminal 11
Paradip CQ3 Berth 3
Paradip Coal Berth 3
Total Value 68
Total SOTP Valuation 100
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Essar Shipping- Encouraging performance…
Essar Shipping Ports and Logistics Ltd (Essar Shipping) reported an
encouraging performance with a 26% QoQ rise in topline due to an
improved performance from the ocean transport business. The company
currently operates two ports at Vadinar (46 MTPA wet cargo) and
Hazira (30 MTPA dry cargo) with a combined operational capacity of 76
MTPA, which is expected to get ramped up to 158 MTPA over the next
two years with the establishment of three new ports/berths. However,
there has been a delay in the construction of two new jack up rigs,
which will lead to a delay in earnings from oilfield services business.
Improved performance in Q3FY11
Essar Shipping reported a 26% QoQ rise in revenue at | 819 crore, which
was mainly on account of a rise in earnings from the ocean transport
division of the company, which increased QoQ from | 276 crore to | 347
crore. The oilfield services business reported a 7% decline in revenue
from | 99 crore to | 92 crore as its semi submersible rig earned slightly
lower charter rates. Earnings from the ports and terminal business
increased by 2% from | 173 crore to | 177 crore. In the nine months,
Vadinar and Hazira combined handled 29.3 MT of cargo. With the rise in
dry bulk volumes at the Hazira port, earnings from the port business are
expected to increase significantly, going forward. The operating margin
increased from 31.1% to 36.5% QoQ with EBITDA of | 299 crore. The
company reported a 149% rise in PAT QoQ to | 27 crore in Q3FY11.
Valuation
At the CMP of | 98, the stock is trading at 26.9x FY12E EPS of | 3.6 and
0.67x FY12E book value of | 145. We have valued each division on a DCF
basis to arrive at price target of | 100 and recommend ADD rating.
Essar Shipping offers a diversified play with a presence in the shipping,
logistics and ports business. In the last few years, the company has
ramped up its presence in the port and terminal business with the
commissioning of Vadinar port (46 MTPA wet cargo) and Hazira (30 MTPA
dry cargo) port. However, we expect the performance from the ocean
transport business to be subdued on account of weakness in freight rates.
Further, there has also been a delay in the construction of two new jack
up rigs by ABG Shipyard, which will be delivered in Q4FY12 and Q2FY13.
This will lead to a delay in earnings from the oilfield services business.
At the CMP of | 98, the stock is trading at 26.9x FY12E EPS of | 3.6 and
0.67x FY12E book value of | 145. We have valued each division on a DCF
basis to arrive at price target of | 100. We recommend an ADD rating to
the stock.
Exhibit 1: Valuation parameter
Business DCF/Rs
Sea and Surface Transport Business 17
Oilfield Services Business 15
Ports & Terminal
VOTL & VPTL 19
Hazira Bulk Terminal 33
Salaya Bulk Terminal 11
Paradip CQ3 Berth 3
Paradip Coal Berth 3
Total Value 68
Total SOTP Valuation 100
Source: Company, ICICIdirect.com Research
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