Result Update Rating matrix Rating : Hold Target : 44 Target Period : 12 months Potential Upside : 9% What s changed? Target Changed from 41 to 425 EPS FY16E Changed from 56.6 to 66.1 EPS FY17E Changed from 54.2 to 67 Rating Hold Quarterly performance Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%) Revenue 1,33.5 867.8 19.1 946.5 9.2 EBITDA 588.6 367. 6.4 56.4 16.2 EBITDA (%) 57. 42.3 1467 bps 53.5 345 bps PAT 382.7 26.6 85.2 323.7 18.2 Key financials Crore FY14 FY15 FY16E FY17E Net Sales 3,92 3,438 3,834 3,946 EBITDA 1,436 1,433 1,857 1,931 Net Profit 574 748 1,131 1,186 EPS ( ) 38.1 49.6 75. 78.7 Valuation summary FY14 FY15 FY16E FY17E P/E 9.2 7.1 5.4 5.1 Target P/E 1.6 8.2 5.4 5.4 EV / EBITDA 5.7 6.4 4.8 4.9 P/BV.8.7.7.6 RoNW (%) 8.5 1.1 13.5 12.6 RoCE (%) 6.8 6.3 9.3 8.5 Stock data Particular Amount Market Capitalization ( Crore) 6,16.6 Total Debt Gross (FY14) ( Crore) 6,149.3 Cash and Investments (FY14) ( Crore) 2,38.1 EV ( Crore) 9,189.1 52 week H/L 422 / 327 Equity capital 15.8 Face value 1. Stock data Stocks 1M 3M 6M 1 Yr GE Shipping 11.5 8.6 13.7 1.3 SCI 1.7 2.5 7.8 3.2 Mercator Lines 5.9 14.4 5. -12.9 Research Analyst s Bharat Chhoda bharat.chhoda@icicisecurities.com Ankit Panchmatia ankit.panchmatia@icicisecurities.com November 13, 215 Great Eastern Shipping (GESHIP) 45 Product carrier adding to elevated tanker rates GE Shipping s (Gesco) Q2FY16 revenue grew 19% YoY (up 9% QoQ) at 133.5 crore (I-direct estimate: 936.6 crore). Revenue days for the shipping segment improved significantly from 263 days in Q2FY15 to 2834 days in Q2FY16. Furthermore, utilisation for offshore segment was at 221 days vis-à-vis 212 days in Q2FY15 EBITDA sequentially continued to bolster for the third consecutive quarter on the back of lower bunker costs that declined 36% YoY. EBITDA for quarter grew 6% YoY (up 16% QoQ) to 589 crore (Idirect estimate: 459 crore). Subsequently, EBITDA margins continued to inch up to 57% in current quarter. Higher realisation on same assets & better utilisation levels added to lower bunker costs A better operational performance coupled with lower tax rate led PAT (before exceptional gain/loss) to more than double to 361 crore compared to 155 crore in Q2FY15. Adjusted PAT for the quarter was at 383 crore, which included loss of 15.3 crore on sale of ship and forex gain of 37 crore Standalone NAV grew 7.6% QoQ to 367 compared to 341 in the previous quarter. Consolidated NAV was at 565 in Q2FY16 compared to 536 in Q1FY16 Product carrier rate accelerates; tanker rate continues to be elevated TCY rates for crude carriers continued to stay above $3/day levels for the third consecutive quarter. This provides a firm footing to the company s earning in tanker segment. On the back of continuous higher supplies from refineries to meet limited demand, these rates are expected to remain strong at current levels. Added momentum during the quarter was provided by increase in rates for product tankers that sequentially grew 34% (up 47% YoY) to $3128/day. With a combination of eight crude carriers, 12 product carriers and one gas carrier we believe the company is well positioned to capture the opportunity in terms of favourable rates. Favourable fleet configuration; poised for continued momentum Gesco is the second largest shipping fleet operator in the country with 3 ships totalling ~2.36 million dwt haulage capacity and an average age of 9.6 years. Gesco s fleet profile is skewed towards the tanker segment due to which it was comparatively less impacted by the meltdown in the shipping industry. Softness in dry bulk shipping freight rates continued on the back of subdued trade environment. Following this, the revenue visibility for shipping for H2FY16 was at 271 crore while for the offshore segment in the same period it was at 89 crore. Earnings visibility, operating leverage already factored; retain HOLD With a proactive management at the helm, Gesco has deliberately reduced its exposure to the dry bulk segment. Further, on the back of higher tanker rates majority of the carriers are held on spot market. The management also gains from fluctuations of asset rates on the back of trading of ships. We believe this performance will continue, which is already priced in. We marginally increase our revenue expectation, which would grow at a CAGR of 6% over 215-17E. The operational performance would lead profitability growth to outpace revenue growth. Thus, we expect EBITDA, PAT to grow at a CAGR of 13%, 16% respectively. Following this, we revise our FY17E book value to 625 and continue to assign P/BV multiple of.7x to arrive at a fair price of 44. We have a HOLD recommendation on the stock. ICICI Securities Ltd Retail Equity Research
Variance analysis Revenue Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments Shipping segment revenue posted growth of 14% YoY on back of good product 1,33.5 936.6 867.8 19.1 946.5 9.2 carrier rates and firm tanker rates. Offshore revenues grew 13% Employee Expenses 154.8 149.9 14.7 1. 146.4 5.7 Fuel oil & water 79.9 93.7 126.3-36.7 8.6 -.8 Hire of chartered ships & equip 23.8 37.5 26.3-9.7 28.4-16.4 Other expenses 186.4 196.7 27.5-1.2 184.8.9 EBITDA 588.6 458.9 367. 6.4 56.4 16.2 Lower Fuel and maintainence expenses perked up EBITDA EBITDA Margin (%) 57. 49. 42.3 1467 bps 53.5 345 bps Margins expanded for the third consecutive quarter Depreciation 166.7 165.4 153. 8.9 161.4 3.3 Interest 73.9 8.2 78.4-5.8 69.9 5.8 Other income 34.7 37.5 4.5-14.5 19.2 8.9 Extra-ordinary gain/loss Includes loss on sale of ship to the tune of 15 crore and forex gain of 37 21.8. 52. -58.2 59.2 NA crore Total Tax 21.8 3.1 21.5 1.4 29.8-28. PAT 382.7 22.8 26.6 85.2 323.7 18.2 Key Metrics Q2FY16 Q2FY15 YoY Q1FY16 QoQ Shipping 65.9 57.1 14.2 562.2 15.8 Tanker & product carrier performance resutled in the shipping growth Offshore 491.3 433.1 13.4 496.6-1.1 Improvement on the back of better refining activities Revenue Days (Shipping) 2,834. 2,63. 8.9 2,642. 7.3 Revenue Days (Offshore) 2,21. 2,12. 4.7 2,167. 1.6 Change in estimates FY16E FY17E ( Crore) Old New % Change Old New % Change Comments Revenue 3,671. 3,833.5 4.4 3,813.7 3,946.1 3.5 Our FY16 & FY17 revenue estimates revised upwards EBITDA 1,65.6 1,856.5 15.6 1,69.9 1,93.9 14.2 EBITDA Margin (%) 43.7 48.4 469 bps 44.3 48.9 459 bps On the back of continued lower fuel costs we have increased our margin estimates for FY16, however we expect this to moderate in FY17 PAT 853.7 1,13.7 32.4 817.5 1,186.4 45.1 EPS ( ) 56.6 75. 32.4 54.2 78.7 45.1 Assumptions Current Earlier Comments Average (TCY $/ day) FY15 FY16E FY17E FY16E FY17E Crude carriers 21,575 28,414 37,214 27,631 36,178 Increased our estimations on the back of sustained tanker rates Product carrier (incl Gas) 2,797 2,88 24,533 19,522 23,847 Traction experienced in the quarter and expect it to sustain Dry Bulk 1,176 9,289 1,232 9,289 1,232 Unchanged ICICI Securities Ltd Retail Equity Research Page 2
Company Analysis Product tanker keeps afloat as dry bulk recuperates The shale gas revolution in the US together with geopolitical risks arising in Iran and the Middle & North Africa (MENA) region resulted in long-haul trade routes such as China, India and Latin-America. In terms of global fleet addition, crude and product tanker segment tonnage capacity increased at a CAGR of ~4.5% over 27-13. As the segment added lower capacity vis-à-vis the dry bulk segment, the freight rates downfall was arrested, to a large extent. In the dry bulk segment, capacity addition of nearly 16 and 58 million dwt was done in CY12 and CY13, respectively. Though the dry bulk segment fleet addition has tapered it is expected to grow at 6% and 4% in CY15 and CY16, respectively. Consequently, freight rates continue to remain subdued. However, with a pick-up in global seaborne trade, the dry bulk segment is also expected to revive. As a result, Gesco plans to add five Kamsarmax dry bulk carriers in FY16 to take advantage of the turning tide. Exhibit 1: Shipping segment trend 3 The shipping business for FY15-16 has revenue visibility of ~ 33 crore. Of the total number of fleet operating days, crude and product carriers (including gas) are covered to the extent of 27% and 15%, respectively, whereas the dry bulk segment is covered till 15% of fleet s operating days. 25 2 15 1 5 143.3 146.3 481.7 431.1 179.6 1735.2 317.3 24.7 564.5 493.2 1734.1 1492.6 FY12 FY13 FY14 FY15 Revenue EBITDA PAT Offshore segment continues to support amid turbulent times Gesco through its subsidiary Greatship Ltd operates 24 offshore vessels, which includes three jack-up rigs, four platform support vessels, nine AHTSV, two MPSSV and six ROVSVs. Gesco s offshore segment is pretty young with average age of nearly four years and is equipped with technologically advanced positioning and fire fighting equipment. Further, as safety becomes an important issue for oil companies, a young and advanced fleet due to higher efficiency and minimum downtime comes as a natural choice. Globally, an offshore vessel fleet is more than 22 years old whereas jack-up rigs are about 24 years. Currently, the order book for jack up rigs is at 22% of current fleet (523 rigs) followed by PSV and AHTSV with order book of nearly 19% and 6% of current fleet, respectively. On the demand front, though global E&P companies are expected to increase spending to ~$65 billion (up 4% YoY), spending on offshore is expected to remain flattish. Consequently, utilisation and demand levels are expected to taper for offshore companies. ICICI Securities Ltd Retail Equity Research Page 3
Exhibit 2: Offshore segment On the offshore front, revenue visibility remains robust and stands at 151 crore for FY15-16. The fleet is better covered to the extent of 82% and 59% in PSV and AHTSV segment, respectively. In case of ROVSV and MPSSV, the coverage stood at 77% and 29%, respectively, whereas jack-up rigs are covered to the extent of 94% of their operating days for FY15-16 35 3 25 2 15 1 5 369.3 43.9 177.5 391.5 942.5 868.7 597.8 728.4 1245.9 1271.5 1599.3 174. FY12 FY13 FY14 FY15 Revenue EBITDA PAT Exhibit 3: Topline performance trend cr 45 4 35 3 25 2 15 1 5 3833.5 3946.1 3438. 2955.5 36.7 391.9 FY12 FY13 FY14 FY15E FY16E FY17E Revenue Exhibit 4: EBITDA performance trend 25 55. cr 2 15 1 186. 37. 1159.5 38.9 47.1 1435.7 1433.2 42.1 193.9 1856.548.8 49.3 5. 45. 4. 35. % 5 3. 25. FY12 FY13 FY14 FY15E FY16E FY17E EBITDA OPM (%) 2. ICICI Securities Ltd Retail Equity Research Page 4
Exhibit 5: OPM (%) trend Shipping & Offshore Offshore segment margins contracted 47 bps to 41.7% in FY15, on account higher expenses for mobilization of a rig and a PSV. However, going ahead, on account of higher utilisation and lower mobilisation, cost margins are expected to improve. Shipping segment margins continue to reel under pressure 5. 45. 4. 35. 3. 25. 2. 15. 1. 5.. 36.5 38.6 46.4 41.7 33. 32.6 28.2 24.8 FY12 FY12 FY13 FY14 OPM (%) Standalone (Shipping) OPM (%) Subsidiaries (Offshore & others) Exhibit 6: PAT performance trend Shipping & Offshore cr 14 12 1 8 6 4 1.8 316.6 537.7 18. 574. 18.8 748.2 22. 113.7 29.7 1186.4 3.3 35. 3. 25. 2. 15. 1. % 2 5. FY12 FY13 FY14 FY15E FY16E FY17E PAT NPM. Exhibit 7: Gesco's fleet During FY15, GE Shipping s fleet size in the shipping segment was at 29 vessels comprising eight crude carriers, 12 product carriers, one gas carrier and eight dry bulk carriers. In terms of dead weight tonnage, the total fleet comprises 2.28 million dwt with an average age of 9.9 years. On the offshore fleet front, it comprises 5 PSV s, 6 ROSVs, 9 AHTSVs and 4 rigs. 14 12 1 8 6 4 2 8 8 13 12 9 1 1 1 4 4 8 8 5 5 2 2 6 6 Crude Product Dry Bulk LPG-VLGC Rig AHTS PSV MPSSV ROVSV Current Fleet FY16E ICICI Securities Ltd Retail Equity Research Page 5
Exhibit 8: Vessels on order Vessel Type Medium Range (MR) Product Tanker 2 (Two) Kamsarmax Dry Bulk Carriers 3 (Three) Kamsarmax Dry Bulk Carriers Approx Dwt Expected Delivery 5 Q4FY216 STX (Dalian) Shipbuilding Co. Ltd.,China 816 H1FY16 Built at Tsuneishi Shipbuilding Co.Ltd, Japan (Philippines facility) 82,(each) Q2 & Q3 CY16 Jiangsu New Yangzi Shipbuilding Co. Ltd.,China Exhibit 9: Owned revenue days decline sharply 35 Revenue days (owned tonnage) for shipping fleet declined 11%, since Q4FY13 to ~26 days, which stagnated at same level; thereby exposing the fleet to the volatility of the spot market (Days) 3 25 2 259 2599 2582 2735 263 2547 263 2574 2769 15 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Revunue Days (Standalone) Net asset value improves on back of higher utilisation In terms of net asset value, over the past 1 years (FY5-14) Gesco recorded an average NAV of 56 on a consolidated basis with a peak of 632 in FY8. However, since the crisis, the NAV declined at a CAGR of ~8% over FY8-13 as asset prices plummeted globally. However, on the back of steady seaborne trade growth at a CAGR of 5% between 212 and 214, asset prices had increased. Prices climbed sharply over FY13-14 posting growth of 3% YoY against an average of 8% in the past three years (FY11 to FY13). In Q2FY16, NAV was at 565, which sequentially improved from 518 in FY15 and 536 in Q1FY16. Gesco s average market price has always traded at a discount to its NAV. With the recent run up in stock price, the stock is at discount of 4% to the current NAV. Exhibit 1: NAV to market price discount 6 5 4 3 2 339 31 55.51 42 426 362.41.41.28 262 248 251 268 518 536.32 4 35.25 565.36 361.6.5.4.3.2 1.9 FY1 FY11 FY12 FY13 FY14 FY15 Q1FY16 Q2FY16.1. NAV AVG Market Price Disc to NAV Avg Discount to NAV ICICI Securities Ltd Retail Equity Research Page 6
Valuation The key to GE Shipping s stable performance in spite of being in a cyclical industry has been the ability of its management to make the purchase and sale of vessels at the right time. The composition of the fleet (crude, dry bulk, offshore) has mostly been balanced and in line with the market outlook for specific segments. The company has not shied away from reducing exposure to a segment that has a depressed outlook and adding vessels from a segment where the prospects are better. All this has been achieved with a moderate leverage compared to its peers who have been at the wrong end of the asset purchase/sale cycle or over aggressive on a specific segment resulting in fleet concentration and, thereby, highly volatile earnings. We believe that GE Shipping would continue its consistent performance on the back of a diversified fleet profile (48% shipping, 52% offshore). Its presence in the high margin offshore segment would enable it to have revenue visibility, going ahead, and reduce the volatility in revenues and cushion its earnings. GE Shipping s low leverage would enable it to tap fleet expansion opportunities and grow at a decent pace. We expect it to maintain a dividend payout in excess of ~2% over the next two years. Rates for tanker segment have remained stable and improved significantly over the past year. Going ahead, the product tanker category and gas carriers are expected to perform well on back of firmer charter rates. However, dry bulk rates have declined/stagnant and going ahead with increased capacity it is expected to remain subdued. The average P/BV multiple for Gesco was.6x in FY14 against.57x in FY13. Going ahead, as overall outlook remains fairly stable we rollover to FY17 estimates with expected book value of 625 in FY17E and assign a P/BV of.7x to FY17E estimates to arrive at a fair price of 44 and recommend HOLD rating on the stock. Exhibit 11: P/BV trend 6. 5. 4. 3. 2. 1.. Oct-5 Oct-6 Oct-7 Oct-8 Oct-9 Oct-1 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Close -Unit Curr.5 X.6 X.7 X.8 X 1. X Exhibit 12: Valuations Sales Sales EPS EPS PE EV/EBITDA RoNW RoCE ( cr) Growth (%) ( ) Growth (%) (x) (x) (%) (%) FY14 391.9 2.8 38.1 7.8 9.2 5.7 8.5 6.8 FY15 3438. 11.2 49.6 3.4 7.1 6.4 1.1 6.3 FY16E 3833.5 11.5 75. 51.1 5.4 4.8 13.5 9.3 FY17E 3946.1 2.9 78.7 4.9 5.1 4.9 12.6 8.5 ICICI Securities Ltd Retail Equity Research Page 7
Company snapshot 5 45 Target Price: 44 4 35 3 25 2 15 1 5 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Feb-11 Apr-11 Event Finance Ministry allows duty free import of spare parts to ship owners GE Shipping sells three VLCCs under construction of 318, dwt each and mulls focusing on lucrative ofshore segment; BDI falls 5% in six months Nov-11 Sharp decline in profit of 84% YoY in Q2FY12 Jul-12 GE Shipping plans to buy VLGC of about 49,7 dwt of 199 built and is expected to join the fleet in Q2FY13 Aug-13 GE Shipping announces buy back of shares @ 279 to the aggregate amount of 279 crore Sep-13 Order of offshore rig (delivery 215), taken delivery of medium range product tanker "Jag Pranav" Oct-13 RBI restricts FII purchase on GE Shipping after it triggers limit of 24%; GE Shipping contracts to build three new Kamsarmax ships Jun-15 Posted Q1FY16 results. Reported best ever EBITDA margins 3.3%, since FY1 Nov-15 Posted Q2FY16 results. Revenue grew 9% and EBITDA margins stood at 57% d Top 1 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 ICICI Prudential Asset Management Co. Ltd. 31-Aug-15 1.6 16..3 2 Sheth (Bharat Kanaiyalal) 3-Sep-15 9.83 14.83. 3 Sheth (Ravi Kanaiyalal) 3-Sep-15 9.53 14.36. 4 Nalanda Capital Pte Ltd 3-Sep-15 6.98 1.52. 5 Fidelity Management & Research Company 3-Sep-15 3.96 5.97. 6 ICICI Prudential Life Insurance Company Ltd. 3-Sep-15 3.65 5.5. 7 UTI Asset Management Co. Ltd. 3-Sep-15 3.29 4.96.13 8 Laadki Trading & Investment, Ltd. 3-Sep-15 3.7 4.62. 9 Stewart Investors 3-Apr-15 2.47 3.73. 1 General Insurance Corporation of India 3-Sep-15 2.3 3.47. Shareholding Pattern (in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Promoter 3.5 3.5 3.4 3.4 3.4 FII 23.9 22.7 22.1 22.9 22. DII 17.3 18. 19.1 19. 19.9 Others 28.2 28.9 28.3 27.7 27.7 Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares First State Investments (Singapore) 7.21m 1.26m Franklin Advisers, Inc. -14.12m -2.2m PGGM Vermogensbeheer B.V. 3.85m.67m DNB Asset Management (Asia) Limited -4.26m -.74m Manulife Asset Management (Asia) 2.33m.38m Caisse de Depot et Placement du Quebec -1.34m -.23m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 8
Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15P FY16E FY17E Total operating Income 3,91.9 3,438. 3,833.5 3,946.1 Growth (%) 2.8 11.2 11.5 2.9 Employee Expenses 56.9 557.9 627.3 645.6 Fuel, Oil & Water 395.7 56.5 342.2 352.2 Hire of Chartered ships 79.2 119.3 133.1 127.2 Spares & Stores 21. 211.6 228.1 254.3 Repairs & maintainence 134.53 189.3 152.8 176.8 Other 338.9 42.5 494.3 459.8 Total Expenditure 1,656.2 2,4.8 1,977. 2,15.2 EBITDA 1,435.7 1,433.2 1,856.5 1,93.9 Growth (%) 23.8 -.2 29.5 4. Depreciation 658. 614.4 626.5 666.5 Interest 378.8 3.6 311.1 37.4 Other Income 131.3 165.1 181. 214.3 PBT 53.2 683.3 1,99.9 1,171.3 Extraord Income / (Exp) 11.2 114.8 115.9 118.2 Total Tax 59.2 49.9 85.1 13.2 PAT 574. 748.2 1,13.7 1,186.4 Growth (%) 6.7 6.7 3.4 51.1 EPS ( ) 38.1 49.6 75. 78.7 Cash flow statement Crore (Year-end March) FY14P FY15P FY16E FY17E Profit after Tax 574. 748.2 1,13.7 1,186.4 Add: Depreciation 658. 614.4 626.5 666.5 (Inc)/dec in Current Assets 43.3-5.3-261. -25.8 Inc/(dec) in CL and Provisions 24. 9.8 125. -1,21.9 Others 35.4 123.5. 25. CF from operating activities 2,123.4 1,746.3 1,932.2 1,182.5 (Inc)/dec in Investments -1. -6.6 6.6. (Inc)/dec in Fixed Assets -1,815.5-1,743.1-1,226.5-1,266.5 Others.... CF from investing activities -1,595.6-1,749.7-1,219.9-1,266.5 Issue/(Buy back) of Equity -152.5... Inc/(dec) in loan funds -1,5. 823.2-623.1 5. Dividend paid & dividend tax -185.7-149.9-158.8-158.8 Inc/(dec) in Sec. premium.... Others 1,268.3-878.4 99.2 9.5 CF from financing activities -498.6 367.3-975.9 43.4 Net Cash flow 29.2 363.9-263.5-4.6 Opening Cash 1,987. 2,16.2 2,38.1 2,116.6 Closing Cash 2,16.2 2,38.1 2,116.6 2,76. Balance sheet Crore (Year-end March) FY14P FY15P FY16E FY17E Liabilities Equity Capital 15.8 15.8 15.8 15.8 Reserve and Surplus 6,621.8 7,279.8 8,251.8 9,279.5 Total Shareholders funds 6,772.5 7,43.6 8,42.6 9,43.2 Total Debt 4,639.4 5,462.6 4,839.5 5,339.5 Long Term Provisions 29.2 33.4 33.4 33.4 Minority Int / Others.... Total Liabilities 11,441.2 12,926.6 13,275.5 14,83.1 Assets Gross Block 13,633.2 15,161.9 16,161.9 17,161.9 Less: Acc Depreciation 3,432.6 4,47. 4,673.5 5,34. Net Block 1,2.6 11,114.9 11,488.4 11,821.9 Capital WIP.... Total Fixed Assets 1,2.6 11,114.9 11,488.4 11,821.9 Oth non-current assets 19.5 132.2 3. 3. Investments 26. 32.6 26. 26. Inventory 139.7 14.1 187.5 193. Debtors 275. 334.6 447.9 461. Loans and Advances 143.2 129.5 229.2 235.8 Other Current Assets 1,127.8 1,27.2 1,596.3 1,643.1 Cash 2,16.2 2,38.1 2,116.6 2,76. Total Current Assets 3,71.8 4,254.5 4,577.4 4,68.9 Creditors 212.5 215.5 312.5 321.6 Oth liab and provisions 2,386.2 2,393.1 2,421. 1,21. Total Current Liabilities 2,598.7 2,68.5 2,733.5 1,531.6 Net Current Assets 1,13.1 1,645.9 1,843.9 3,77.3 Others Assets 2..9.9.9 Application of Funds 11,441.2 12,926.6 13,275.5 14,83.1 Key ratios (Year-end March) FY14P FY15P FY16E FY17E Per share data ( ) EPS 38.1 49.6 75. 78.7 Cash EPS 81.7 9.4 116.5 122.9 BV 449.2 492.8 557.3 625.4 DPS 15.9 12.8 13.6 13.6 Cash Per Share 133.7 157.9 14.4 137.7 Operating Ratios (%) EBITDA Margin 47.1 42.1 48.8 49.3 PBT / Total Operating income 17.1 19.9 28.7 29.7 PAT Margin 18.8 22. 29.7 3.3 Inventory days 16.5 18. 18. 18. Debtor days 32.9 43. 43. 43. Creditor days 25.1 3. 3. 3. Return Ratios (%) RoE 8.5 1.1 13.5 12.6 RoCE 6.8 6.3 9.3 8.5 RoIC 6.1 7.1 1.2 9.3 Valuation Ratios (x) P/E 9.2 7.1 5.4 5.1 EV / EBITDA 5.7 6.4 4.8 4.9 EV / Net Sales 2.7 2.7 2.3 2.4 Market Cap / Sales 1.7 1.8 1.6 1.5 Price to Book Value.8.7.7.6 Solvency Ratios Debt/EBITDA 3.2 3.8 2.6 2.8 Debt / Equity.7.7.6.6 Current Ratio 1.4 1.6 1.7 3. Quick Ratio 16.8 19.1 14. 13.7. ICICI Securities Ltd Retail Equity Research Page 9
ICICIdirect.com coverage universe (Shipping) EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) CMP ( ) TP ( ) Rating Mcap ( Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E G.E Shipping 45 44 HOLD 6,16.6 49.6 75. 78.7 7.1 5.4 5.1 6.4 4.8 4.9 6.3 9.3 8.5 1.1 13.5 12.6 Pipavav Defence 57 55 HOLD 4,196.4-2.6 -.4.7 NA NA 167. 15.9 39.6 22.3 -.4 1.1 3.2-2.5-6.2 1.4 Guj Pipavav port# 16 225 BUY 7,728. 4. 6.2 7.8 35.3 22.7 18. 27. 17.9 14.1 9.5 17.6 17. 13.7 17.5 18.1 SCI 77 7 HOLD 3,586.7 4.3 7.3 8.8 17.4 1.3 8.5 8.2 6.7 5.5.5 2.5 2.9 2.7 4.9 5.6 ICICI Securities Ltd Retail Equity Research Page 1
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/2% for large caps/midcaps, respectively, with high conviction; Buy: >1%/15% for large caps/midcaps, respectively; Hold: Up to +/-1%; Sell: -1% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 4 93 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 11
ANALYST CERTIFICATION We /I, Bharat Chhoda, MBA and Ankit Panchmatia, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH99. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. 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Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Bharat Chhoda, MBA and Ankit Panchmatia, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Bharat Chhoda, MBA and Ankit Panchmatia, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. 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