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http://content.icicidirect.com/mailimages/ICICIdirect%20ShippingCorporation_Q3FY12.pdf
E x t r a o r d i n a r y i n c o m e b o o s t s p r o f i t a b i l i t y…
Shipping Corporation (SCI) reported a profit after three consecutive
quarters of losses, albeit due to an extraordinary income of | 175.2 crore.
Revenues for Q3FY12 grew by 12% to 1147.5 crore (I-direct estimate:
| 1013.4 crore). EBITDA declined by 26% YoY but registered a QoQ rise
of 20% to | 118 crore. The EBITDA margin stood at 10.3% compared to
18.1% and 9.6% in Q3FY11 and Q2FY12, respectively. Though
depreciation was higher by 8% QoQ at | 158 crore, lower interest
expense (down 29% QoQ at | 102.8 crore) and an extraordinary profit on
sale of vessels (| 175.2 crore) enabled SCI to report a net profit of | 74.1
crore. Over the last two years, SCI’s operating performance has been
burdened owing to bunker cost to sales ratio increasing from 22% in
Q1FY11 to 42% in Q3FY12. We expect the pressure on the operating
margin to continue, going ahead, which would lead to the company
reporting losses in FY12 and FY13.
ƒ Segmental performance and fleet status
Both major segments in which SCI operates i.e. bulk and container were
under pressure during Q3FY12. The container segment reported an EBIT
loss of | 24 crore while the bulk segment reported a profit of | 137.7 crore
only on the back of other operating income of | 180 crore (of which | 169
crore is exchange gain). The offshore segment reported an EBIT of | 23
crore in Q3FY12 against | 18 crore in Q2FY12. SCI currently owns a fleet
of 77 vessels, which is expected to be increased to 100 by FY13 through
phased induction of new vessels. Though SCI will be able to report a
growth in revenues, lower EBITDA margin, higher interest and
depreciation costs are expected to curtail the profitability.
V a l u a t i o n
We expect the pressure on the operating margin to continue owing to a
weak freight scenario. Also, higher interest and depreciation cost would
negatively impact SCI’s profitability, going ahead. At the CMP of | 77, the
stock is trading at 0.54x FY13E book value of | 143. We have valued the
stock at 0.4x FY13E book value to arrive at a price target of | 57 and
recommend a SELL rating. Existing investors can exit the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect%20ShippingCorporation_Q3FY12.pdf
E x t r a o r d i n a r y i n c o m e b o o s t s p r o f i t a b i l i t y…
Shipping Corporation (SCI) reported a profit after three consecutive
quarters of losses, albeit due to an extraordinary income of | 175.2 crore.
Revenues for Q3FY12 grew by 12% to 1147.5 crore (I-direct estimate:
| 1013.4 crore). EBITDA declined by 26% YoY but registered a QoQ rise
of 20% to | 118 crore. The EBITDA margin stood at 10.3% compared to
18.1% and 9.6% in Q3FY11 and Q2FY12, respectively. Though
depreciation was higher by 8% QoQ at | 158 crore, lower interest
expense (down 29% QoQ at | 102.8 crore) and an extraordinary profit on
sale of vessels (| 175.2 crore) enabled SCI to report a net profit of | 74.1
crore. Over the last two years, SCI’s operating performance has been
burdened owing to bunker cost to sales ratio increasing from 22% in
Q1FY11 to 42% in Q3FY12. We expect the pressure on the operating
margin to continue, going ahead, which would lead to the company
reporting losses in FY12 and FY13.
ƒ Segmental performance and fleet status
Both major segments in which SCI operates i.e. bulk and container were
under pressure during Q3FY12. The container segment reported an EBIT
loss of | 24 crore while the bulk segment reported a profit of | 137.7 crore
only on the back of other operating income of | 180 crore (of which | 169
crore is exchange gain). The offshore segment reported an EBIT of | 23
crore in Q3FY12 against | 18 crore in Q2FY12. SCI currently owns a fleet
of 77 vessels, which is expected to be increased to 100 by FY13 through
phased induction of new vessels. Though SCI will be able to report a
growth in revenues, lower EBITDA margin, higher interest and
depreciation costs are expected to curtail the profitability.
V a l u a t i o n
We expect the pressure on the operating margin to continue owing to a
weak freight scenario. Also, higher interest and depreciation cost would
negatively impact SCI’s profitability, going ahead. At the CMP of | 77, the
stock is trading at 0.54x FY13E book value of | 143. We have valued the
stock at 0.4x FY13E book value to arrive at a price target of | 57 and
recommend a SELL rating. Existing investors can exit the stock.
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