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M u t e d p e r f o r m a n c e …
ABG Shipyard (ABG) reported a lower-than-expected performance on the
topline and net profit front in Q1FY12. The company reported revenues of
| 522 crore as against our expectation of | 584 crore and net profit of |
40.1 crore against our expectation of | 61 crore. Though revenues on a
YoY basis have increased by 16%, lately ABG’s pace of execution has not
picked up and is a cause for concern. EBITDA margin (including subsidy)
has declined by 550 bps YoY to 22.2% on account of other expenses to
sales ratio increasing from 13.6% in Q1FY11 to 18.6% in Q1FY12. The
company has booked a subsidy of ~ | 19 crore for Q1FY12 against | 21.7
crore in Q1FY11. Lower subsidy has further contributed to EBITDA
(including subsidy) being lower YoY. During Q1FY12, ABG received an
order from the Indian navy for construction of two cadet training ships
worth | 970 crore. This has strengthened the gross order book to | 14500
crore. The order book pending execution stands at ~ | 11,000 crore.
Though the order book seems to be substantial and provides revenue
visibility till FY16, we are concerned over the quality and execution of the
order book. On the execution front, the construction of jack-up rigs for
Essar Shipping is behind schedule by almost a year while on the quality
front, more than 20% of the order book comprises orders placed by
ABG’s group companies.
ƒ Higher depreciation keeps net profit growth muted
ABG delivered 16% YoY growth in revenues against our expectation of
29% growth. The lower than expected performance has been mainly due
to a slower execution of order book and a 550 bps decline in EBITDA
margin YoY to 22.2% with EBITDA declining by 7% to | 115.9 crore.
Though interest charges have declined by 13%, higher depreciation (up
by 68%) has kept the net profit growth muted at 4%. Thus, the company
has been able to report a net profit of | 40.1 crore.
V a l u a t i o n
At the CMP of | 341, the stock is trading at 6.7x FY13E EPS of | 44.7 and
1.01x FY13E book value of | 338. We have valued the stock at 1.0x FY13E
book value to arrive at price target of | 338 and recommend a HOLD
rating. Existing investors should also continue to hold the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M u t e d p e r f o r m a n c e …
ABG Shipyard (ABG) reported a lower-than-expected performance on the
topline and net profit front in Q1FY12. The company reported revenues of
| 522 crore as against our expectation of | 584 crore and net profit of |
40.1 crore against our expectation of | 61 crore. Though revenues on a
YoY basis have increased by 16%, lately ABG’s pace of execution has not
picked up and is a cause for concern. EBITDA margin (including subsidy)
has declined by 550 bps YoY to 22.2% on account of other expenses to
sales ratio increasing from 13.6% in Q1FY11 to 18.6% in Q1FY12. The
company has booked a subsidy of ~ | 19 crore for Q1FY12 against | 21.7
crore in Q1FY11. Lower subsidy has further contributed to EBITDA
(including subsidy) being lower YoY. During Q1FY12, ABG received an
order from the Indian navy for construction of two cadet training ships
worth | 970 crore. This has strengthened the gross order book to | 14500
crore. The order book pending execution stands at ~ | 11,000 crore.
Though the order book seems to be substantial and provides revenue
visibility till FY16, we are concerned over the quality and execution of the
order book. On the execution front, the construction of jack-up rigs for
Essar Shipping is behind schedule by almost a year while on the quality
front, more than 20% of the order book comprises orders placed by
ABG’s group companies.
ƒ Higher depreciation keeps net profit growth muted
ABG delivered 16% YoY growth in revenues against our expectation of
29% growth. The lower than expected performance has been mainly due
to a slower execution of order book and a 550 bps decline in EBITDA
margin YoY to 22.2% with EBITDA declining by 7% to | 115.9 crore.
Though interest charges have declined by 13%, higher depreciation (up
by 68%) has kept the net profit growth muted at 4%. Thus, the company
has been able to report a net profit of | 40.1 crore.
V a l u a t i o n
At the CMP of | 341, the stock is trading at 6.7x FY13E EPS of | 44.7 and
1.01x FY13E book value of | 338. We have valued the stock at 1.0x FY13E
book value to arrive at price target of | 338 and recommend a HOLD
rating. Existing investors should also continue to hold the stock.
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