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http://www.icicidirect.com/mailimages/ICICIdirect_ConsolidatedResultPreview_Q4FY12E.pdf
Shipping/Offshore/Shipbuilding
ƒ Dry bulk freight rates decline due to oversupply, lower demand
The Baltic Dry Index (BDI) average for Q4FY12 at 880 was 46% lower
than in Q3FY12. Of the constituents of BDI, the quarterly average for the
Baltic Capesize Index (BCI) declined by 51% QoQ to 1612 while the
quarterly average for Baltic Panamax index and Baltic Supramax index
declined 45% and 41% to 1019 and 835, respectively. Oversupply
across categories, high Chinese iron ore inventory and lower demand
from China negatively impacted the demand for dry bulk carriers.
Hence, this resulted in a severe decline in freight rates. Indian shipping
companies normally have a healthy long term charter to spot ratio.
However, in the current scenario, companies are averse to entering into
long term contracts and prefer the spot market as freight rates are much
below their historic yearly averages and locking the vessels for a longer
period at current freight rates does not appear lucrative.
ƒ Tanker freight rates remain range bound
The Baltic Dirty Tanker Index (BDTI) average for Q4FY12 at 812 was 1%
higher than in Q3FY12 while the Baltic Clean Index average for Q4FY12
at 687 was 5.9% lower than Q3FY12. In the near term, tanker freight
rates could see a positive momentum owing to escalating tension
between European nations and Iran. However, over the longer term,
crude oil tanker freight rates are expected to remain subdued owing to
the oversupply of tonnage with 11% of present fleet expected to be
delivered in 2012, which would handicap the market.
ƒ Q4FY12E performance (QoQ basis)
We expect Q4FY12E revenues of the I-Direct shipping universe to
remain flattish with QoQ growth of 0.9% to | 5267 crore due to
continued depressed freight rates across various vessel categories. Due
to sustained low rates and high fleet age, Q3FY12 had seen a substantial
sale of old vessels while the net fleet size has reduced in spite of some
new vessel inductions among companies under I-Direct coverage. On
the EBITDA margin front, we expect a marginal improvement from
27.2% in Q3FY12 to 27.7% in Q4FY12E owing to the induction of high
margin offshore vessels. We expect the I-Direct shipping universe to
register 40% QoQ decline in net profit to | 200.1 crore, owing to lower
extraordinary income from profit on sale of vessels. On the stock wise
profitability front, we expect positive growth in profitability of Aban,
ABG Shipyard and Pipavav Defence. In contrast, we expect lower profits
for GE Shipping, Mercator with SCI to report a loss due to lower
extraordinary income.
: Company specific view
Company Remarks
Aban Offshore We expect Aban's Q4FY12E revenues to remain flattish and increase marginally by
0.4% on a QoQ basis due to deployment for the entire quarter of Aban V and Aban VII,
which had secured contracts at the beginning of Q3FY12. We expect the company to
report QoQ growth of 2% and 13% in EBITDA and PAT, respectively
ABG Shipyard The topline is expected to maintain its upward momentum and rise by 2% QoQ on the
back of a marginal up-tick in execution pace. The EBITDA is expected to remain
flattish with a 1% increase while higher interest and depreciation cost owing to
addition to gross block would curtail the profitability
GE Shipping Revenue is expected to rise 4% QoQ due to induction of two AHTS vessels. EBITDA is
expected to improve by 5% on back of a 60 bps QoQ improvement in EBITDA margin
due to increased proportion of high margin offshore vessels. We expect net profit to
decline 9% owing to a QoQ decline of 17% in extraordinary income
Global Offshore Revenues & EBITDA are expected to remain flat owing to stagnant fleet status and
similar freight rates as in preceding quarter owing to majority of vessels being on long
term charter. However, higher interest cost and lower other income would curtail net
profit, which is expected to decline 15% to | 9.3 crore
Great Offshore Revenue is expected to rise by 3% QoQ in Q4FY12E to | 218 crore due to higher
utilisation of offshore vessels and partial employment of the rig Badrinath, which was
idle in the preceding quarter. However, net profit is likely to decline 10% to | 7.5 crore
owing to lower extraordinary income
Mercator Lines Revenues are expected to rise 2% QoQ to ~ | 1123 crore in Q4FY12E due to the
impact of higher utilisation of expanded dredger fleet. EBITDA margin is expected to
improve 40 bps due to improved margins in dredger segment. However, net profit is
expected to decline due to absence of extraordinary income
SCI A reduction in net fleet size over the last two quarters owing to sale of 12 vessels
against induction of seven vessels would result in lower revenues. We expect EBITDA
margins to decline 50 bps due to subdued spot freight rates and expect SCI to report a
net loss on account of lower extraordinary income
Pipavav Defence
& Offshore
Engineering
Company
Pipavav's revenues are expected to rise by 7.8% QoQ to | 497 crore in Q4FY12E with
EBITDA margin improving 20 bps to 24.8% due to higher efficiency resulting from the
full impact of operationalisation of both the Goliath cranes for the entire quarter. We
expect the net profit to rise by 39% to | 19.5 crore
Source: Company, ICICIdirect.com Research
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