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D i sm a l o p e r a t i n g p e r f o r m a n c e…
Shipping Corporation (SCI) reported a loss for the third consecutive
quarter. Though revenues for Q2FY12 grew by 4.6% to 1017.4 crore (Idirect estimate of | 900.6 crore), EBITDA declined by 17% to | 98.1 crore
due to a QoQ dip of 250 bps in EBITDA margin to 9.6%. Higher interest
cost further aggravated the situation and SCI reported a net loss of |
140.6 crore for the quarter. SCI’s revenues have increased due to dual
impact of induction of new vessels and exchange rate variation. The
EBITDA margin declined mainly on account of an increase of bunker cost
to sales ratio by 507 bps on a QoQ basis to 38%. SCI’s profitability has
been further negatively impacted by a five-fold increase in interest cost to
| 146 crore (of which | 126 crore is due to the impact of exchange rate
variation, which is notional in nature). We expect SCI’s profitability to
remain under stress despite an increase in revenues in FY12 and FY13.
ƒ All segments under pressure
All the segments in which SCI operates i.e. bulk, container and offshore
were under pressure during Q2FY12. Bulk and container segments
reported EBIT losses of | 44 crore and | 1.6 crore, whereas even the
offshore segment EBIT was down by 57% to | 18 crore. SCI currently
owns a fleet of 81 vessels, which is expected to be increased to 90 by
FY12 and 100 by FY13 through phased induction of new vessels. Though
SCI will be able to report a growth in revenues, higher interest and
depreciation costs are expected to curtail the profitability. The expansion
of the fleet undertaken by SCI does not bode well for the company in the
current weak freight rates scenario, which would make the breakeven of
vessels take longer as these assets were ordered during 2007-08 during
the peak freight rate cycle at significantly higher prices.
V a l u a t i o n
At the CMP of | 63, the stock is trading at 0.42x FY13E book value of |
149. We have valued the stock at 0.4x FY13E book value to arrive at a
price target of | 59 and recommend a HOLD rating. Existing investors can
exit the stock at any upsides in stock price.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D i sm a l o p e r a t i n g p e r f o r m a n c e…
Shipping Corporation (SCI) reported a loss for the third consecutive
quarter. Though revenues for Q2FY12 grew by 4.6% to 1017.4 crore (Idirect estimate of | 900.6 crore), EBITDA declined by 17% to | 98.1 crore
due to a QoQ dip of 250 bps in EBITDA margin to 9.6%. Higher interest
cost further aggravated the situation and SCI reported a net loss of |
140.6 crore for the quarter. SCI’s revenues have increased due to dual
impact of induction of new vessels and exchange rate variation. The
EBITDA margin declined mainly on account of an increase of bunker cost
to sales ratio by 507 bps on a QoQ basis to 38%. SCI’s profitability has
been further negatively impacted by a five-fold increase in interest cost to
| 146 crore (of which | 126 crore is due to the impact of exchange rate
variation, which is notional in nature). We expect SCI’s profitability to
remain under stress despite an increase in revenues in FY12 and FY13.
ƒ All segments under pressure
All the segments in which SCI operates i.e. bulk, container and offshore
were under pressure during Q2FY12. Bulk and container segments
reported EBIT losses of | 44 crore and | 1.6 crore, whereas even the
offshore segment EBIT was down by 57% to | 18 crore. SCI currently
owns a fleet of 81 vessels, which is expected to be increased to 90 by
FY12 and 100 by FY13 through phased induction of new vessels. Though
SCI will be able to report a growth in revenues, higher interest and
depreciation costs are expected to curtail the profitability. The expansion
of the fleet undertaken by SCI does not bode well for the company in the
current weak freight rates scenario, which would make the breakeven of
vessels take longer as these assets were ordered during 2007-08 during
the peak freight rate cycle at significantly higher prices.
V a l u a t i o n
At the CMP of | 63, the stock is trading at 0.42x FY13E book value of |
149. We have valued the stock at 0.4x FY13E book value to arrive at a
price target of | 59 and recommend a HOLD rating. Existing investors can
exit the stock at any upsides in stock price.
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