Visit http://indiaer.blogspot.com/ for complete details �� ��
ABG Shipyard – 2QFY2011 Result Update
Angel Broking recommends a Neutral on ABG Shipyard.
ABG Shipyard (ABG) reported strong 2QFY2011 results, ahead of our estimates
on the back of revenue booking from the recent orders. ABG has seen revival in
fresh order additions (~`2,700cr in FY2011 till date) as compared to a listless
FY2010. The company’s unexecuted order book (OB) stands at ~`10,500cr and
executable by FY2014. Execution has also been healthy following ramp up at the
Dahej yard, and in 1HFY2011 ABG delivered seven vessels. The company’s net
debt has improved with the D/E ratio at 1.8x for 1HFY2011 v/s 3.1x for FY2010.
Nonetheless, owing to the recent sharp rally, at current levels the stock is trading
at fair valuations. Hence, we recommend Neutral on the stock.
Faster execution, strong OPM: ABG’s revenue (ex subsidy) grew 56.3% yoy
(29.4% qoq) to `554cr in 2QFY2011 as it began executing orders which were
earlier deferred by clients and started recognising revenues stage-wise. Also, from
the new `2,000cr rig orders, ABG recognised partial revenues as construction of
one rig is already underway. OPM came in at 26.0% (up 852bp yoy and 186bp
qoq) as the company booked more than 50% of its revenue from the high-margin
rig segment. Subsidy also fell sharply to `1.1cr as against `47cr in 2QFY2010
and `21cr in 1QFY2011 due to higher revenue contribution from the rig
segment. Depreciation increased 199.9% yoy (flat qoq) to `14cr due to project
capitalisation (Dahej Shipyard) since the last quarter. Interest cost declined 5.6%
yoy on account of reduction in net debt. Thus, PAT increased 22.8% yoy and
46.6% qoq to `56cr.
Outlook and Valuation: We have upgraded our earnings estimates for FY2011
and FY2012 by 47.7% and 50.4% respectively, on the back of the recent strong
addition to order book and faster execution capabilities. However, the ABG stock
in the last three months has spiked 75.7%. Hence, at current levels it is trading at
fair valuations and in line with some of its Asian peers at 7.5x FY2012E earnings,
7.0x FY2012E EV/EBIDTA and 1.8x FY2012E P/BV. Hence, we maintain our
Neutral view on the stock as it factors in the near-term growth opportunities.
No comments:
Post a Comment