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Shiv-Vani Oil and Gas
Below estimates on lower order execution…
Shiv-Vani Oil reported a disappointing set of numbers for Q2FY11 with
revenues declining 11.2% YoY to | 287.3 crore and profits declining
42.2% YoY to |32.6 crore mainly on account of lower order book
execution. The EBITDA declined by 5.4% YoY from |138.2 crore in
Q2FY10 to |130.7 crore in Q2FY11. However, EBITDA margins increased
280 bps YoY to 45.5% in Q2FY11. Shiv-Vani Oil’s profitability was below
estimates mainly on account of higher than anticipated interest costs.
The company’s seismic revenues declined to ~|65 crore in Q2FY11
against ~|165 crore revenues in Q1FY11 on account of lower seismic
activities in North East India due to heavy rains. The company has
reduced its revenue growth targets for FY11E and FY12E due to the
higher execution time period. The company’s order book of ~|3,200
crore would be executed in the 2.5 to three years. The company has bid
for orders worth |3,000 crore and expects to bag |1,000-1,500 crore
worth of orders. We maintain our BUY rating on the stock with a
reduced price target of |474.
Highlights of the quarter
Lower project execution mainly in seismic activities has led to an
11.2% YoY decrease in revenues from |323.5 crore in Q2FY10 to
|287.3 crore in Q2FY11. The company has 40 rigs and 32 are fully
operational in the current quarter. Shiv-Vani reported a net profit
decline of 42.2% YoY from |56.4 crore in Q2FY10 to |32.6 crore in
Q2FY11. Shiv-Vani Oil plans to utilise the amount raised for FCCBs
for buying new equipment and for acquisitions.
Valuation
Shiv Vani’s current order book of ~|3200 crore to be executed over the
next 2.5-3 years provides visibility, going forward. The stock is currently
trading at 7.2x FY12E EPS of |56.7 and at an EV/EBITDA multiple of 5.6x
FY12E. We have valued Shiv Vani at 6x FY12E EV/EBITDA, with a price
target of |474.
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