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U p t i c k i n e x e c u t i o n ; b e t t er o p e r a t i n g p e r f o r m a n c e …
ABG Shipyard (ABG) reported a better-than-expected performance for
Q2FY12 on the topline front while net profit was in line with our
estimates. ABG reported revenues of | 581.6 crore as against our
expectation of | 558.5 crore and net profit of | 48.4 crore (I-direct
estimate: | 47.8 crore) for Q2FY12. EBITDA margin (including subsidy)
improved by 162 bps QoQ and was higher than our estimate of 23% at
23.8%. EBITDA margin excluding subsidy stood at 22.5% for the quarter.
Though depreciation (up 6%) and interest cost (up 19%) were higher,
ABG was able to report a QoQ growth of 21% in net profit to | 48.4 crore.
Revenues reported for Q2FY12 have been the highest ever quarterly
revenue recorded by ABG. The pick-up in execution has been brought
about by higher utilisation of expanded yard capacity.
ƒ Order book status
ABG’s total order book stands at ~ | 15000 crore, of which the
unexecuted order book is at ~ | 10000 crore. During Q1FY12, the
company had secured an order of | 970 crore for construction of two
cadet training ships for the Indian Navy. ABG’s order book provides
revenue visibility of 5x FY11 revenues, which is significant in the current
scenario of weak new order flow for shipyards across the globe. Though
the order book seems to be substantial and provides revenue visibility till
FY16, we remain cautious over the quality and execution of the order
book. On the execution front, the construction of jack-up rigs for Essar
Shipping is behind schedule by almost a year while on the quality front,
more than 20% of the order book comprises orders placed by ABG’s
group companies. We consider execution pick-up during Q2FY12 as a
positive, which should enable the company to speed up the order book
execution.
V a l u a t i o n
At the CMP of | 388, the stock is trading at 7.5x FY13E EPS of | 51.6 and
1.1x FY13E book value of | 339. Considering the pick-up in execution, we
have valued the stock at 1.1x FY13E book value (Q1FY12: 1x) to arrive at
a price target of | 373 and recommend a HOLD rating. Existing investors
can also continue to hold the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
U p t i c k i n e x e c u t i o n ; b e t t er o p e r a t i n g p e r f o r m a n c e …
ABG Shipyard (ABG) reported a better-than-expected performance for
Q2FY12 on the topline front while net profit was in line with our
estimates. ABG reported revenues of | 581.6 crore as against our
expectation of | 558.5 crore and net profit of | 48.4 crore (I-direct
estimate: | 47.8 crore) for Q2FY12. EBITDA margin (including subsidy)
improved by 162 bps QoQ and was higher than our estimate of 23% at
23.8%. EBITDA margin excluding subsidy stood at 22.5% for the quarter.
Though depreciation (up 6%) and interest cost (up 19%) were higher,
ABG was able to report a QoQ growth of 21% in net profit to | 48.4 crore.
Revenues reported for Q2FY12 have been the highest ever quarterly
revenue recorded by ABG. The pick-up in execution has been brought
about by higher utilisation of expanded yard capacity.
ƒ Order book status
ABG’s total order book stands at ~ | 15000 crore, of which the
unexecuted order book is at ~ | 10000 crore. During Q1FY12, the
company had secured an order of | 970 crore for construction of two
cadet training ships for the Indian Navy. ABG’s order book provides
revenue visibility of 5x FY11 revenues, which is significant in the current
scenario of weak new order flow for shipyards across the globe. Though
the order book seems to be substantial and provides revenue visibility till
FY16, we remain cautious over the quality and execution of the order
book. On the execution front, the construction of jack-up rigs for Essar
Shipping is behind schedule by almost a year while on the quality front,
more than 20% of the order book comprises orders placed by ABG’s
group companies. We consider execution pick-up during Q2FY12 as a
positive, which should enable the company to speed up the order book
execution.
V a l u a t i o n
At the CMP of | 388, the stock is trading at 7.5x FY13E EPS of | 51.6 and
1.1x FY13E book value of | 339. Considering the pick-up in execution, we
have valued the stock at 1.1x FY13E book value (Q1FY12: 1x) to arrive at
a price target of | 373 and recommend a HOLD rating. Existing investors
can also continue to hold the stock.
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