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ABG Shipyard -Expensive valuations…
ABG Shipyard (ABG) has reported a steady performance with stable
operating and net margins although the order execution pace has
slowed down. The construction of jack-up rigs for Essar Shipping is
behind schedule by almost a year, which is a cause for concern despite
the strong order book. ABG has received an order for two jack-up rigs
worth | 2000 crore in Q3FY11. This has strengthened the gross order
book to | 14470 crore. However, we remain cautious as the order was
placed by ABG’s group company Drilling and Offshore Pte Ltd. With
this the orders placed by ABG’s group companies constitute 22.2% of
the gross order book. The order placed by Pacific First Shipping, which
is a group company of ABG Shipyard, constitutes 8.37% of the order
book while Drilling and Offshore constitutes 13.8% of the order book.
Order execution pace drops in Q3FY11
ABG reported a 2.8% QoQ drop in revenue in Q3FY11 to | 540.2 crore
on account of a slowdown in the order execution pace. Order execution
is likely to pick up in the last quarter of FY11. The operating margin of
the company declined to 25.8% with EBITDA at | 139.2 crore as against
26.2% operating margin in Q2FY11. The company reported a net profit
of | 53.5 crore in Q3FY11. This was marginally lower than | 56.3 crore in
the immediately preceding quarter.
Valuation
At the CMP of | 343, the stock is trading at 7.6x FY12E EPS of | 45.3 and
1.2x FY12E book value of | 293. We have valued the stock at 1.0x FY12E
book value to arrive at price target of | 293. We maintain our SELL rating
on the stock as valuations appear stretched.
Globally, oversupply of vessels has resulted in drying up of newbuild
orders for shipyards. ABG has received marginal orders in the last two
years except the recent big ticket order for two jack-up rigs worth | 2000
crore. The company has a gross order book of | 14470 crore and order
book pending execution of | 8242 crore.
However, we remain cautious as the order was placed by its group
company Drilling and Offshore Pte Ltd. Further, ABG is constructing two
jack-up rigs for Essar Shipping and the construction is behind schedule by
almost a year. This is a cause of concern despite the strong order book.
At the CMP of | 343, the stock is trading at 7.6x FY12E EPS of | 45.3 and
1.2x FY12E book value of | 293. We have valued the stock at 1.0x FY12E
book value to arrive at a price target of | 293. We maintain our SELL
rating on the stock as valuations appear stretched.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ABG Shipyard -Expensive valuations…
ABG Shipyard (ABG) has reported a steady performance with stable
operating and net margins although the order execution pace has
slowed down. The construction of jack-up rigs for Essar Shipping is
behind schedule by almost a year, which is a cause for concern despite
the strong order book. ABG has received an order for two jack-up rigs
worth | 2000 crore in Q3FY11. This has strengthened the gross order
book to | 14470 crore. However, we remain cautious as the order was
placed by ABG’s group company Drilling and Offshore Pte Ltd. With
this the orders placed by ABG’s group companies constitute 22.2% of
the gross order book. The order placed by Pacific First Shipping, which
is a group company of ABG Shipyard, constitutes 8.37% of the order
book while Drilling and Offshore constitutes 13.8% of the order book.
Order execution pace drops in Q3FY11
ABG reported a 2.8% QoQ drop in revenue in Q3FY11 to | 540.2 crore
on account of a slowdown in the order execution pace. Order execution
is likely to pick up in the last quarter of FY11. The operating margin of
the company declined to 25.8% with EBITDA at | 139.2 crore as against
26.2% operating margin in Q2FY11. The company reported a net profit
of | 53.5 crore in Q3FY11. This was marginally lower than | 56.3 crore in
the immediately preceding quarter.
Valuation
At the CMP of | 343, the stock is trading at 7.6x FY12E EPS of | 45.3 and
1.2x FY12E book value of | 293. We have valued the stock at 1.0x FY12E
book value to arrive at price target of | 293. We maintain our SELL rating
on the stock as valuations appear stretched.
Globally, oversupply of vessels has resulted in drying up of newbuild
orders for shipyards. ABG has received marginal orders in the last two
years except the recent big ticket order for two jack-up rigs worth | 2000
crore. The company has a gross order book of | 14470 crore and order
book pending execution of | 8242 crore.
However, we remain cautious as the order was placed by its group
company Drilling and Offshore Pte Ltd. Further, ABG is constructing two
jack-up rigs for Essar Shipping and the construction is behind schedule by
almost a year. This is a cause of concern despite the strong order book.
At the CMP of | 343, the stock is trading at 7.6x FY12E EPS of | 45.3 and
1.2x FY12E book value of | 293. We have valued the stock at 1.0x FY12E
book value to arrive at a price target of | 293. We maintain our SELL
rating on the stock as valuations appear stretched.
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