Research Done by - Prabhudas Lilladher
Result Sna
pshot
ABG Shipyard grew revenues by 8.2% YoY and 13.4% QoQ to Rs 1,746 million and profits by 6.7% and 12.5% to Rs 330 million after booking an income from subsidy of Rs 185 million. OPM improved from 12.3% last year to 17.9% during the quarter. Sequentially there has been a dip of 90 bps due to one time payment of octroi. For the full year revenues and profits have grown by 33.4% and Rs 38.9% to Rs 6,235 million and Rs 1,163 million respectively. OPM improved from 14.2% last year to 18.4% in FY07.
Result Highlights
Recent acquisition to help consolidate presence at Magdala
The company recently signed a MOU with Vipul shipyard. The total capex including the acquisition cost and modernization is about Rs 1 billion. It is located next to ABG’s existing yard at Surat thereby making the acquisition is strategic in nature. This will help ABG consolidate its position there and also help ward of any future competitors who could have set up a yard there. This shipyard will augments ABG’s capacity by 25%. It offers about 5-8 berths depending on the size of the vessel. ABG has also had to take over Vipul’s current order book, which is roughly worth about Rs 400 million. Once these orders will be executed ABG can execute its own orders there.
Other expansions on schedule
Apart from this, the expansion at Dahej is also progressing as per schedule. This yard will commence operations by April 1, 2008. In addition another rig yard is also being set up. The estimated capex on both expansions is close to Rs 10 billion all of which will be funded by way of internal accruals and borrowings. The company has already tied up the debt. No equity dilutions are expected. The company is currently already in negotiation with Essar for an order to construct a rig. The first rig is likely to be delivered in the next 24-30 months. The company is in talks for converting its unit at Dahej in to an EOU or a SEZ. No clarity is available yet.
Well-diversified order book
The current unexecuted order book stands at Rs 30.8 billion of which 75% is in favour of exports. About 40-45% of these orders are from the oil and gas sector. Within this category, it has received orders to construct DP – 2 and DP – 3 that are more sophisticated in nature. The company also boasts of being one of the only shipyards to build coastguard vessels. Currently it also has orders in hand to construct specialized vessels such as icebreakers. It continues to witness robust order inflow and is in negotiation for new orders. The last delivery on the current order book is slated for November 2011. Of the Rs 40 billion order book, about Rs 10 billion is for the new yard coming up at Dahej, where the company can build up to 90,000 DWT vessels.
Valuation
As on March 07, the company has total borrowings to the tune of Rs 2.6 billion, which is expected to rise to Rs 7 billion by March 08, and Rs 12 billion by March 09 due to expansions at Dahej I and Dahej II. Debt to equity ratio will rise from the current 0.5x to 1.5x over the same period. At the CMP, the stock is trading at rich valuations of 14.7x FY08E and 12.5x FY09E EPS estimates of Rs 27.3 and Rs 32.0 respectively. On an EV/EBITDA basis it is quoting at 14.8x FY08E and 11.8x FY09E. Thus while order book visibility continues to remains high (5.0x order book to sales based on last 12 months trailing revenues), we feel that the stock may loose momentum in the near term. Receipt of money on account of subsidy could act as a trigger for the stock. From a medium to long-term perspective we maintain Outperformer on the stock.
Result Sna
pshotABG Shipyard grew revenues by 8.2% YoY and 13.4% QoQ to Rs 1,746 million and profits by 6.7% and 12.5% to Rs 330 million after booking an income from subsidy of Rs 185 million. OPM improved from 12.3% last year to 17.9% during the quarter. Sequentially there has been a dip of 90 bps due to one time payment of octroi. For the full year revenues and profits have grown by 33.4% and Rs 38.9% to Rs 6,235 million and Rs 1,163 million respectively. OPM improved from 14.2% last year to 18.4% in FY07.
Result Highlights
Recent acquisition to help consolidate presence at Magdala
The company recently signed a MOU with Vipul shipyard. The total capex including the acquisition cost and modernization is about Rs 1 billion. It is located next to ABG’s existing yard at Surat thereby making the acquisition is strategic in nature. This will help ABG consolidate its position there and also help ward of any future competitors who could have set up a yard there. This shipyard will augments ABG’s capacity by 25%. It offers about 5-8 berths depending on the size of the vessel. ABG has also had to take over Vipul’s current order book, which is roughly worth about Rs 400 million. Once these orders will be executed ABG can execute its own orders there.
Other expansions on schedule
Apart from this, the expansion at Dahej is also progressing as per schedule. This yard will commence operations by April 1, 2008. In addition another rig yard is also being set up. The estimated capex on both expansions is close to Rs 10 billion all of which will be funded by way of internal accruals and borrowings. The company has already tied up the debt. No equity dilutions are expected. The company is currently already in negotiation with Essar for an order to construct a rig. The first rig is likely to be delivered in the next 24-30 months. The company is in talks for converting its unit at Dahej in to an EOU or a SEZ. No clarity is available yet.
Well-diversified order book
The current unexecuted order book stands at Rs 30.8 billion of which 75% is in favour of exports. About 40-45% of these orders are from the oil and gas sector. Within this category, it has received orders to construct DP – 2 and DP – 3 that are more sophisticated in nature. The company also boasts of being one of the only shipyards to build coastguard vessels. Currently it also has orders in hand to construct specialized vessels such as icebreakers. It continues to witness robust order inflow and is in negotiation for new orders. The last delivery on the current order book is slated for November 2011. Of the Rs 40 billion order book, about Rs 10 billion is for the new yard coming up at Dahej, where the company can build up to 90,000 DWT vessels.
Valuation
As on March 07, the company has total borrowings to the tune of Rs 2.6 billion, which is expected to rise to Rs 7 billion by March 08, and Rs 12 billion by March 09 due to expansions at Dahej I and Dahej II. Debt to equity ratio will rise from the current 0.5x to 1.5x over the same period. At the CMP, the stock is trading at rich valuations of 14.7x FY08E and 12.5x FY09E EPS estimates of Rs 27.3 and Rs 32.0 respectively. On an EV/EBITDA basis it is quoting at 14.8x FY08E and 11.8x FY09E. Thus while order book visibility continues to remains high (5.0x order book to sales based on last 12 months trailing revenues), we feel that the stock may loose momentum in the near term. Receipt of money on account of subsidy could act as a trigger for the stock. From a medium to long-term perspective we maintain Outperformer on the stock.
1 comment:
Aw. this was a really quality post.
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