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Shipping Corporation of India - Fairly priced…
Shipping Corporation of India (SCI) reported subdued results in Q3FY11
with its liner as well as bulk division both underperforming. The liner
division reported a dip in profits after a couple of good quarters while
higher tanker rates in Q3FY11 helped the company to stem the decline
to an extent. High bunker costs due to a rise in crude oil prices led to a
significant decline in EBITDA, which was the lowest in the last four
quarters. The stock has corrected significantly and is trading below its
FPO price of | 140 and also below its FY12 book value of | 166. It
appears fairly priced at current price levels.
Operating performance under pressure in Q3FY11
The topline registered a modest QoQ 1.4% rise in Q3FY11 to | 888.9
crore on account of an improved performance by the tanker division of
the company. The liner division once again came under pressure with its
profits declining from | 37.1 crore in Q2FY11 to | 9.6 in Q3FY11. The
liner division reported a topline of | 297.2 crore, which was ~33% of the
total revenue of the company. The company posted an EBITDA of |
161.2 crore and generated an operating margin of 18.1%, which was
significantly lower than the 25.2% margin in the immediately preceding
quarter. The main reason for the decline in EBITDA was higher bunker
costs due to rise in crude oil prices. The profit for the quarter was | 123.1
crore, which also included extraordinary gains of | 57.5 crore on account
of profit on sale of ships. Excluding this extraordinary item, the company
reported an operating net profit of | 65.6 crore. The company has also
declared an interim dividend of | 3.0 per share.
Valuation
At the CMP of | 114, the stock is trading at 15.6x FY12E EPS of | 7.3 and
0.69x FY12E book value of | 166. We have valued SCI at 0.75x FY12E
P/BV to arrive at price target of | 124. We recommend an ADD rating on
the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shipping Corporation of India - Fairly priced…
Shipping Corporation of India (SCI) reported subdued results in Q3FY11
with its liner as well as bulk division both underperforming. The liner
division reported a dip in profits after a couple of good quarters while
higher tanker rates in Q3FY11 helped the company to stem the decline
to an extent. High bunker costs due to a rise in crude oil prices led to a
significant decline in EBITDA, which was the lowest in the last four
quarters. The stock has corrected significantly and is trading below its
FPO price of | 140 and also below its FY12 book value of | 166. It
appears fairly priced at current price levels.
Operating performance under pressure in Q3FY11
The topline registered a modest QoQ 1.4% rise in Q3FY11 to | 888.9
crore on account of an improved performance by the tanker division of
the company. The liner division once again came under pressure with its
profits declining from | 37.1 crore in Q2FY11 to | 9.6 in Q3FY11. The
liner division reported a topline of | 297.2 crore, which was ~33% of the
total revenue of the company. The company posted an EBITDA of |
161.2 crore and generated an operating margin of 18.1%, which was
significantly lower than the 25.2% margin in the immediately preceding
quarter. The main reason for the decline in EBITDA was higher bunker
costs due to rise in crude oil prices. The profit for the quarter was | 123.1
crore, which also included extraordinary gains of | 57.5 crore on account
of profit on sale of ships. Excluding this extraordinary item, the company
reported an operating net profit of | 65.6 crore. The company has also
declared an interim dividend of | 3.0 per share.
Valuation
At the CMP of | 114, the stock is trading at 15.6x FY12E EPS of | 7.3 and
0.69x FY12E book value of | 166. We have valued SCI at 0.75x FY12E
P/BV to arrive at price target of | 124. We recommend an ADD rating on
the stock.
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