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Shipping/Offshore/Shipbuilding
Upmove in dry bulk freight rates
The Baltic Dry Index (BDI) average for Q3FY12 at 1927 was 26.1% higher
than in Q2FY12. Of the constituents of BDI, Baltic Capesize Index
maintained its positive momentum of Q2FY12 with a 39.6% rise in
quarterly average to 3304 from 2386 level in Q2FY12, while Baltic
Panamax index and Baltic Supramax index rose by 14% and 5%
respectively. Capesize vessels witnessed higher demand on account of
change in iron ore import pattern of China. Chinese iron ore imports
from India reduced due to monsoon and had to be compensated with
long haul from Australian and Brazilian ports which are conducive for
large size capesize vessels as compared to smaller Indian ports which
are more suited for panamax and supramax vessels. Though quarterly
average for BDI has been higher but we expect the average freight rates
for Indian shipping companies to improve marginally from Q2FY12
levels. The dry bulk fleet of Indian shipping companies mainly consists
of Panamax and Supramax vessels which after initial rise in October
have seen softening in freight rates in November and December.
Tanker rates improve
The Baltic Dirty Tanker Index (BDTI) average for Q3FY12 at 803 was
13.5% higher than in Q2FY12 while the Baltic Clean Index average for
Q2FY12 at 730 was 7.5% higher than Q2FY12.
Q3FY12E performance (QoQ basis)
The revenue of Idirect shipping universe is expected to marginally
improve by 2.3% due to up-move in dry bulk and tanker freight rates.
We expect EBITDA margin to improve by 80 bps to 29.7%. Net profit is
expected to increase by 57% to | 104 crore from | 66 crore in Q2FY12,
which was the lowest profit recorded in the last ten quarters. In Q2FY12,
profitability of Indian shipping sector was severely dented due to
accounting of higher interest cost on notional increase in value of long
term foreign currency debt due to fluctuation in exchange rate.
Recently, Ministry of Corporate affairs had notified that such notional
expense provided in Q2FY12 can be written back going ahead. In our
estimates, we have not factored any write-back and assumed similar
treatment as in Q2FY12. However, Shipping Corporation of India and
Great Eastern Shipping, which had accounted for additional interest of
|126 crore and | 57 crore in Q2FY12 could see higher profitability if they
decide to write-back the additional expense accounted in Q2FY12.
Company specific view
Aban Offshore We expect revenues to increase by 4% QoQ as its asset Aban 3 which was idle
during Q2FY12, would be deployed in Q3FY12 as it has secured a long-term contract.
We expect the company to report a QoQ growth of 7% and 14% in EBITDA and PAT,
respectively
ABG Shipyard The topline is expected to rise 5% QoQ on the back of marginal up tick in execution
pace and higher subsidy booking due to higher proportion of export orders. The
operating margin (including subsidy) is likely to remain flattish at 23.5% and net profit
increasing by 7%
Bharati Shipyard We expect a 18% QoQ decline in topline (excluding subsidy) while the operating
margin (excluding subsidy) is expected to decline by 70 bps to 18%. The company
has nearly exhausted its order book and we expect the company to report profits
mainly due to higher subsidy booking on the executed order book
GE Shipping Revenue is expected to rise 5% QoQ due to full impact of new dry bulk carrier and 2
AHTS which had secured order in Q2FY12, as well as due to positive impact of
exchange fluctuation. Net profit is expected to be flattish in spite of improvement in
EBITDA due to rise in interest cost due to exchange variation
Global Offshore Revenues are expected to increase QoQ by 13% to | 59.6 crore due to full utilization
for MV Kailash which was operational only for a period of 21 days in Q2FY12. The
EBITDA margin is expected to remain flat at 23.5% and net profit is expected to
improve by 21% to | 6.9 crore
Great Offshore Revenue is expected to rise by 8% QoQ in Q3FY12 to | 203 crore due to improved
utilization of its OSVs fleet , lower dry docking and recognition of project income
which was not accounted in Q2FY12 due to pending milestone achievement. Net
profit is expected to increase by 39% to | 9 crore
Mercator Lines Revenues are expected to rise 6% QoQ to ~ | 830.3 crore in Q3FY12 due to the
impact of higher utilization of expanded dredger fleet and improvement of coal
volumes. The EBITDA margin is expected to decline by 60 bps owing to higher
proportion of turnover from low margin coal business.
SCI In spite of induction of 1 dry bulk carrier and 1 AHTS, QoQ revenue growth is
expected to be flat due to sale of 5 handymax carriers. We expect other income to
increase by 39% owing to profit on sale of vessels. SCI is expected to report loss on
account of higher interest cost due to exchange rate variation
Pipavav Defence
& Offshore
Engineering
Company
Pipavav's revenues are expected to rise 4% QoQ to | 466 crore in Q3FY12 due to
enhanced utilization after the installation of the second Goliath crane and higher
subsidy booking on account of execution of export orders. Goliath cranes would
enable higher efficiency and we expect EBITDA margin to rise by 150 bps
Source: ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shipping/Offshore/Shipbuilding
Upmove in dry bulk freight rates
The Baltic Dry Index (BDI) average for Q3FY12 at 1927 was 26.1% higher
than in Q2FY12. Of the constituents of BDI, Baltic Capesize Index
maintained its positive momentum of Q2FY12 with a 39.6% rise in
quarterly average to 3304 from 2386 level in Q2FY12, while Baltic
Panamax index and Baltic Supramax index rose by 14% and 5%
respectively. Capesize vessels witnessed higher demand on account of
change in iron ore import pattern of China. Chinese iron ore imports
from India reduced due to monsoon and had to be compensated with
long haul from Australian and Brazilian ports which are conducive for
large size capesize vessels as compared to smaller Indian ports which
are more suited for panamax and supramax vessels. Though quarterly
average for BDI has been higher but we expect the average freight rates
for Indian shipping companies to improve marginally from Q2FY12
levels. The dry bulk fleet of Indian shipping companies mainly consists
of Panamax and Supramax vessels which after initial rise in October
have seen softening in freight rates in November and December.
Tanker rates improve
The Baltic Dirty Tanker Index (BDTI) average for Q3FY12 at 803 was
13.5% higher than in Q2FY12 while the Baltic Clean Index average for
Q2FY12 at 730 was 7.5% higher than Q2FY12.
Q3FY12E performance (QoQ basis)
The revenue of Idirect shipping universe is expected to marginally
improve by 2.3% due to up-move in dry bulk and tanker freight rates.
We expect EBITDA margin to improve by 80 bps to 29.7%. Net profit is
expected to increase by 57% to | 104 crore from | 66 crore in Q2FY12,
which was the lowest profit recorded in the last ten quarters. In Q2FY12,
profitability of Indian shipping sector was severely dented due to
accounting of higher interest cost on notional increase in value of long
term foreign currency debt due to fluctuation in exchange rate.
Recently, Ministry of Corporate affairs had notified that such notional
expense provided in Q2FY12 can be written back going ahead. In our
estimates, we have not factored any write-back and assumed similar
treatment as in Q2FY12. However, Shipping Corporation of India and
Great Eastern Shipping, which had accounted for additional interest of
|126 crore and | 57 crore in Q2FY12 could see higher profitability if they
decide to write-back the additional expense accounted in Q2FY12.
Company specific view
Aban Offshore We expect revenues to increase by 4% QoQ as its asset Aban 3 which was idle
during Q2FY12, would be deployed in Q3FY12 as it has secured a long-term contract.
We expect the company to report a QoQ growth of 7% and 14% in EBITDA and PAT,
respectively
ABG Shipyard The topline is expected to rise 5% QoQ on the back of marginal up tick in execution
pace and higher subsidy booking due to higher proportion of export orders. The
operating margin (including subsidy) is likely to remain flattish at 23.5% and net profit
increasing by 7%
Bharati Shipyard We expect a 18% QoQ decline in topline (excluding subsidy) while the operating
margin (excluding subsidy) is expected to decline by 70 bps to 18%. The company
has nearly exhausted its order book and we expect the company to report profits
mainly due to higher subsidy booking on the executed order book
GE Shipping Revenue is expected to rise 5% QoQ due to full impact of new dry bulk carrier and 2
AHTS which had secured order in Q2FY12, as well as due to positive impact of
exchange fluctuation. Net profit is expected to be flattish in spite of improvement in
EBITDA due to rise in interest cost due to exchange variation
Global Offshore Revenues are expected to increase QoQ by 13% to | 59.6 crore due to full utilization
for MV Kailash which was operational only for a period of 21 days in Q2FY12. The
EBITDA margin is expected to remain flat at 23.5% and net profit is expected to
improve by 21% to | 6.9 crore
Great Offshore Revenue is expected to rise by 8% QoQ in Q3FY12 to | 203 crore due to improved
utilization of its OSVs fleet , lower dry docking and recognition of project income
which was not accounted in Q2FY12 due to pending milestone achievement. Net
profit is expected to increase by 39% to | 9 crore
Mercator Lines Revenues are expected to rise 6% QoQ to ~ | 830.3 crore in Q3FY12 due to the
impact of higher utilization of expanded dredger fleet and improvement of coal
volumes. The EBITDA margin is expected to decline by 60 bps owing to higher
proportion of turnover from low margin coal business.
SCI In spite of induction of 1 dry bulk carrier and 1 AHTS, QoQ revenue growth is
expected to be flat due to sale of 5 handymax carriers. We expect other income to
increase by 39% owing to profit on sale of vessels. SCI is expected to report loss on
account of higher interest cost due to exchange rate variation
Pipavav Defence
& Offshore
Engineering
Company
Pipavav's revenues are expected to rise 4% QoQ to | 466 crore in Q3FY12 due to
enhanced utilization after the installation of the second Goliath crane and higher
subsidy booking on account of execution of export orders. Goliath cranes would
enable higher efficiency and we expect EBITDA margin to rise by 150 bps
Source: ICICIdirect.com Research
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