Aban Offshore Strong revenue visibility-Upgrade to BUY::Emkay

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Aban Offshore

Strong revenue visibility-Upgrade to BUY

BUY

CMP: Rs454                                        Target Price: Rs580

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n     APAT at Rs941 mn (-54% yoy) marginally below expectation on account of lower than expected revenues. Revenues declined 13% yoy & (8.6% qoq) –below estimates

n     EBIDTA at Rs4.6 bn (-12% yoy), came below est led by lower revenues. Margins though up100 bps yoy to 62.7%, declined 331 bps qoq due to 55% jump in insurance charges

n     Only 2 rigs idle-see strong cash flow visibility for Aban-USD 400 mn of CFO over FY11-13, leading to accelerated de-leveraging-Leverage ratios could improve 40% over FY11-13E 

n     Stock decline of ~20% over last 3M, makes valuation of 4.9X & 0.8X P/B attractive providing downside support to stock.  Upgrade to BUY. Target Rs580