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http://content.icicidirect.com/mailimages/ICICIdirect_MercatorLines_Q3FY12.pdf
C o a l v o l u m e s s p u r t …
Mercator Lines (MLL) reported an above estimate performance on both
the revenue and profitability front. On a QoQ basis, revenues spurted by
41% to | 1100 crore (I-direct estimate: | 830.3 crore) while net profit
increased by 250% to | 23.4 crore (I-direct estimate: | 10.8 crore). The
EBITDA margin declined QoQ by 320 bps to 15.5% (I-direct estimate:
18.1%) but EBITDA increased by 17% to | 170 crore on account of higher
revenues. The rise in revenues has been primarily driven by higher coal
volumes. MLL ramped up its coal trading volume during Q3FY12 and sold
1.9 million tonnes (MT) compared to 2.43 MT for H1FY12. Higher traded
volumes during the quarter have led to lower EBITDA margin. Though
interest and depreciation rose QoQ by 13% and 15% to | 54 crore and
| 103 crore, respectively, MLL was able to report a 250% increase in net
profit owing to an exchange gain of | 13.64 crore. Despite the continued
underperformance of the shipping business, MLL is relatively better
placed to ride the volatility due to a major shift in the business model
towards the coal mining and trading business. We expect the contribution
to revenues from the coal segment to increase from 49% in FY11 to 57%
in FY13E reducing the impact of volatility in revenues due to uncertainty
in the shipping segment.
Fleet status
During Q3FY12, MLL acquired a dredger in November 2011. With this
addition, Mercator now operates 18 dry bulk carriers, eight tankers,
seven 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 19.2% and 18.5% to 17.0% and 16.5%,
respectively. Consequently, we have revised downward our EPS
estimates for FY12E and FY13E by 18.6% and 18.7%, respectively. At the
CMP of | 32, the stock is trading at 6.9x FY13E EPS of | 4.6 and 0.3x
FY13E book value of | 97. We have valued the stock at 0.35x FY13E book
value to arrive at a price target of | 34. We recommend a HOLD rating on
the stock. Existing investors can also hold the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_MercatorLines_Q3FY12.pdf
C o a l v o l u m e s s p u r t …
Mercator Lines (MLL) reported an above estimate performance on both
the revenue and profitability front. On a QoQ basis, revenues spurted by
41% to | 1100 crore (I-direct estimate: | 830.3 crore) while net profit
increased by 250% to | 23.4 crore (I-direct estimate: | 10.8 crore). The
EBITDA margin declined QoQ by 320 bps to 15.5% (I-direct estimate:
18.1%) but EBITDA increased by 17% to | 170 crore on account of higher
revenues. The rise in revenues has been primarily driven by higher coal
volumes. MLL ramped up its coal trading volume during Q3FY12 and sold
1.9 million tonnes (MT) compared to 2.43 MT for H1FY12. Higher traded
volumes during the quarter have led to lower EBITDA margin. Though
interest and depreciation rose QoQ by 13% and 15% to | 54 crore and
| 103 crore, respectively, MLL was able to report a 250% increase in net
profit owing to an exchange gain of | 13.64 crore. Despite the continued
underperformance of the shipping business, MLL is relatively better
placed to ride the volatility due to a major shift in the business model
towards the coal mining and trading business. We expect the contribution
to revenues from the coal segment to increase from 49% in FY11 to 57%
in FY13E reducing the impact of volatility in revenues due to uncertainty
in the shipping segment.
Fleet status
During Q3FY12, MLL acquired a dredger in November 2011. With this
addition, Mercator now operates 18 dry bulk carriers, eight tankers,
seven 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 19.2% and 18.5% to 17.0% and 16.5%,
respectively. Consequently, we have revised downward our EPS
estimates for FY12E and FY13E by 18.6% and 18.7%, respectively. At the
CMP of | 32, the stock is trading at 6.9x FY13E EPS of | 4.6 and 0.3x
FY13E book value of | 97. We have valued the stock at 0.35x FY13E book
value to arrive at a price target of | 34. We recommend a HOLD rating on
the stock. Existing investors can also hold the stock.
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