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E x t r a o r d i n a r y i n c o m e e n a b l e s p r o f i t a b i l i t y y e t
a g a i n …
Varun Shipping (VSL) continues to report low EBITDA, which makes it
difficult to cover its interest and depreciation cost. For Q3FY12, VSL
reported revenues of | 79 crore, QoQ growth of 9% and YoY decline of
35%. Though EBITDA improved QoQ from an operating loss of | 9.5
crore in Q2FY12 to an operating profit of | 6.2 crore, the quantum is
inadequate to cover its interest and depreciation cost. At the earning
before tax and extraordinary income level, VSL reported a loss of | 41.4
crore. The company has accounted an extraordinary foreign exchange
gain of | 123.93 crore in Q3FY12, which has enabled it to report a net
profit of | 82.5 crore. For 9MFY12, VSL reported revenue of | 234.6 crore
and net profit of | 147.6 crore (including extraordinary income of | 333.5
crore comprising exchange gain of | 284 crore and profit on sale of assets
of | 49.5 crore). VSL’s earning quality has deteriorated over the last eight
quarters and earnings have been primarily driven by extraordinary
income.
ƒ Fleet status – reduction in owned vessels to lower EBITDA margin
Varun Shipping currently operates a fleet of 21 vessels comprising 11
LPG carriers, seven AHTS and three crude carriers. Of the 21 vessels,
VSL owns only four vessels while the remaining has been sold on a salecum-leaseback arrangement with associate companies. The drastic
reduction in owned fleet would result in lower EBITDA margins, thereby
curtailing the profitability of the company.
V a l u a t i o n
At the CMP of | 19, the stock is trading at 0.37x FY13E book value of | 51.
Considering the reduction in owned fleet and sluggish demand scenario,
we expect VSL’s profitability to remain under stress. VSL’s deteriorating
financial health has led to the company selling its vessels to associate
companies on a sale and lease back arrangement. Sluggish industry
demand and VSL’s stressed financials would pose a serious challenge in
terms of achieving revenue and profitability growth, going ahead. Hence,
we are dropping coverage on the stock. Existing investors can exit the
stock.
http://content.icicidirect.com/mailimages/ICICIdirect_VarunShipping_Q3FY12.pdf
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
E x t r a o r d i n a r y i n c o m e e n a b l e s p r o f i t a b i l i t y y e t
a g a i n …
Varun Shipping (VSL) continues to report low EBITDA, which makes it
difficult to cover its interest and depreciation cost. For Q3FY12, VSL
reported revenues of | 79 crore, QoQ growth of 9% and YoY decline of
35%. Though EBITDA improved QoQ from an operating loss of | 9.5
crore in Q2FY12 to an operating profit of | 6.2 crore, the quantum is
inadequate to cover its interest and depreciation cost. At the earning
before tax and extraordinary income level, VSL reported a loss of | 41.4
crore. The company has accounted an extraordinary foreign exchange
gain of | 123.93 crore in Q3FY12, which has enabled it to report a net
profit of | 82.5 crore. For 9MFY12, VSL reported revenue of | 234.6 crore
and net profit of | 147.6 crore (including extraordinary income of | 333.5
crore comprising exchange gain of | 284 crore and profit on sale of assets
of | 49.5 crore). VSL’s earning quality has deteriorated over the last eight
quarters and earnings have been primarily driven by extraordinary
income.
ƒ Fleet status – reduction in owned vessels to lower EBITDA margin
Varun Shipping currently operates a fleet of 21 vessels comprising 11
LPG carriers, seven AHTS and three crude carriers. Of the 21 vessels,
VSL owns only four vessels while the remaining has been sold on a salecum-leaseback arrangement with associate companies. The drastic
reduction in owned fleet would result in lower EBITDA margins, thereby
curtailing the profitability of the company.
V a l u a t i o n
At the CMP of | 19, the stock is trading at 0.37x FY13E book value of | 51.
Considering the reduction in owned fleet and sluggish demand scenario,
we expect VSL’s profitability to remain under stress. VSL’s deteriorating
financial health has led to the company selling its vessels to associate
companies on a sale and lease back arrangement. Sluggish industry
demand and VSL’s stressed financials would pose a serious challenge in
terms of achieving revenue and profitability growth, going ahead. Hence,
we are dropping coverage on the stock. Existing investors can exit the
stock.
http://content.icicidirect.com/mailimages/ICICIdirect_VarunShipping_Q3FY12.pdf
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