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C o a l v o l u m e s t o i n c r e a s e i n H 2 F Y 1 2 …
Mercator Lines (MLL) reported a below estimate performance on both
revenue and profitability front. On a QoQ basis, revenues reported a 2%
decline to | 781.2 crore (I-direct estimate: | 834.1 crore) while net profit
declined 55% to | 6.7 crore (I-direct estimate: | 25.8 crore). MLL’s EBITDA
margin declined QoQ by 20 bps to 18.7% (I-direct estimate: 20.3%).
MLL’s revenues have been lower than our estimate owing to higher dry
docking of vessels, weak freight rate scenario across vessel categories
and lower revenue from coal segment due to monsoon. MLL has ramped
up its coal trading/mining and for H1FY12 it contributed 58% of the
revenues compared to 40% in H1FY11. The contribution to the revenues
from dry bulk and tankers has come down from 31% and 19% in H1FY11
to 22% and 10% in H1FY12. Despite continued underperformance of the
shipping business, MLL is well placed to ride the volatility due to a major
shift in the business model towards coal mining and trading business. We
expect contribution to revenues from the coal segment to increase from
49% in FY11 to 56% in FY13E reducing the impact of volatility in
revenues due to uncertainty in the shipping segment.
ƒ Fleet status
During Q2FY12, MLL acquired a cutter suction dredger and subsequent
to the end of the quarter it has acquired another TSHD dredger. With this
addition, Mercator now operates 18 dry bulk carriers, eight tankers, six
dredgers and one MOPU and one FSO.
V a l u a t i o n
Considering the significant ramp up in coal trading volumes (low margin
business), we have revised downward our FY12E and FY13E EBITDA
margin estimate from 21.5% and 20.1% to 19.2% and 18.5%,
respectively. Consequently, we have revised downward our EPS
estimates for FY12E and FY13E by 28% and 27%, respectively. At the
CMP of | 22, the stock is trading at 4.0x FY13E EPS of | 5.5 and 0.23x
FY13E book value of | 97. We have valued the stock at 0.35x (Q1FY12:
0.4x) FY13E book value to arrive at a price target of | 34. We recommend
a BUY rating on the stock
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
C o a l v o l u m e s t o i n c r e a s e i n H 2 F Y 1 2 …
Mercator Lines (MLL) reported a below estimate performance on both
revenue and profitability front. On a QoQ basis, revenues reported a 2%
decline to | 781.2 crore (I-direct estimate: | 834.1 crore) while net profit
declined 55% to | 6.7 crore (I-direct estimate: | 25.8 crore). MLL’s EBITDA
margin declined QoQ by 20 bps to 18.7% (I-direct estimate: 20.3%).
MLL’s revenues have been lower than our estimate owing to higher dry
docking of vessels, weak freight rate scenario across vessel categories
and lower revenue from coal segment due to monsoon. MLL has ramped
up its coal trading/mining and for H1FY12 it contributed 58% of the
revenues compared to 40% in H1FY11. The contribution to the revenues
from dry bulk and tankers has come down from 31% and 19% in H1FY11
to 22% and 10% in H1FY12. Despite continued underperformance of the
shipping business, MLL is well placed to ride the volatility due to a major
shift in the business model towards coal mining and trading business. We
expect contribution to revenues from the coal segment to increase from
49% in FY11 to 56% in FY13E reducing the impact of volatility in
revenues due to uncertainty in the shipping segment.
ƒ Fleet status
During Q2FY12, MLL acquired a cutter suction dredger and subsequent
to the end of the quarter it has acquired another TSHD dredger. With this
addition, Mercator now operates 18 dry bulk carriers, eight tankers, six
dredgers and one MOPU and one FSO.
V a l u a t i o n
Considering the significant ramp up in coal trading volumes (low margin
business), we have revised downward our FY12E and FY13E EBITDA
margin estimate from 21.5% and 20.1% to 19.2% and 18.5%,
respectively. Consequently, we have revised downward our EPS
estimates for FY12E and FY13E by 28% and 27%, respectively. At the
CMP of | 22, the stock is trading at 4.0x FY13E EPS of | 5.5 and 0.23x
FY13E book value of | 97. We have valued the stock at 0.35x (Q1FY12:
0.4x) FY13E book value to arrive at a price target of | 34. We recommend
a BUY rating on the stock
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