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P e r f o r m a n c e d e t e r i o r a t e s f u r t h e r …
Varun Shipping Co (Varun Shipping) continued its dismal performance in
Q1FY12 with topline remaining flat at | 83.2 crore. At the EBITDA level,
Varun Shipping reported a loss of | 15.1 crore compared to a loss of | 3.1
crore in Q4FY11. The interest (| 55.9 crore) and depreciation (| 32.7 crore)
resulted in an operating net loss from operations of | 84.8 crore in
Q1FY12. The company has booked an extraordinary profit on sale of
crude tanker and AHTS to the tune of | 49.5 crore in Q1FY12, which has
resulted in reducing net loss to | 35.3 crore. The operational performance
of Varun Shipping is likely to be under pressure for another couple of
years as freight rates continue to remain subdued. Varun Shipping’s
owned fleet has been reduced to just six vessels and the remaining eight
assets are on a sale and lease back arrangement with associate
companies. The sale and lease back arrangement would continue to put a
strain on the EBITDA margin due to a rise in charter hire expenses.
ƒ Operating performance worsens in Q1FY12
Varun Shipping reported a flattish QoQ performance with 0.3% increase
in revenues to | 83.2 crore in Q1FY12 as against | 82.9 crore in Q4FY11.
The continued weakness in crude tanker freight rates and AHTS charter
rates as well as reduction in the fleet size has kept the revenue growth
muted. The company reported a loss of | 15.0 crore at the EBITDA level
in Q1FY12. The dismal EBITDA can be attributed to depressed freight
rates along with a rise in charter hire expenses on account of a sale and
lease back arrangement executed in the previous few quarters. The
company reported a net loss of | 35.3 crore in Q1FY12, which included a
gain of | 49.5 crore on sale of assets. Excluding this, the operating net
loss would have been | 84.8 crore. Going ahead, we expect Varun
Shipping’s revenue to decline in FY12E by 5% to | 466.4 crore and
increase by 13% in FY13E to | 528 crore.
V a l u a t i o n
At the CMP of | 20, the stock is trading at 1.2x FY13E book value of | 17.
We have valued the stock at 1x FY13 P/BV to arrive at a price target of |
17. We maintain our SELL recommendation on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P e r f o r m a n c e d e t e r i o r a t e s f u r t h e r …
Varun Shipping Co (Varun Shipping) continued its dismal performance in
Q1FY12 with topline remaining flat at | 83.2 crore. At the EBITDA level,
Varun Shipping reported a loss of | 15.1 crore compared to a loss of | 3.1
crore in Q4FY11. The interest (| 55.9 crore) and depreciation (| 32.7 crore)
resulted in an operating net loss from operations of | 84.8 crore in
Q1FY12. The company has booked an extraordinary profit on sale of
crude tanker and AHTS to the tune of | 49.5 crore in Q1FY12, which has
resulted in reducing net loss to | 35.3 crore. The operational performance
of Varun Shipping is likely to be under pressure for another couple of
years as freight rates continue to remain subdued. Varun Shipping’s
owned fleet has been reduced to just six vessels and the remaining eight
assets are on a sale and lease back arrangement with associate
companies. The sale and lease back arrangement would continue to put a
strain on the EBITDA margin due to a rise in charter hire expenses.
ƒ Operating performance worsens in Q1FY12
Varun Shipping reported a flattish QoQ performance with 0.3% increase
in revenues to | 83.2 crore in Q1FY12 as against | 82.9 crore in Q4FY11.
The continued weakness in crude tanker freight rates and AHTS charter
rates as well as reduction in the fleet size has kept the revenue growth
muted. The company reported a loss of | 15.0 crore at the EBITDA level
in Q1FY12. The dismal EBITDA can be attributed to depressed freight
rates along with a rise in charter hire expenses on account of a sale and
lease back arrangement executed in the previous few quarters. The
company reported a net loss of | 35.3 crore in Q1FY12, which included a
gain of | 49.5 crore on sale of assets. Excluding this, the operating net
loss would have been | 84.8 crore. Going ahead, we expect Varun
Shipping’s revenue to decline in FY12E by 5% to | 466.4 crore and
increase by 13% in FY13E to | 528 crore.
V a l u a t i o n
At the CMP of | 20, the stock is trading at 1.2x FY13E book value of | 17.
We have valued the stock at 1x FY13 P/BV to arrive at a price target of |
17. We maintain our SELL recommendation on the stock.
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