Report Abg

10
ABG Shipyard Limited 11 August 2011 Jaypee Research Desk  www.jaypeeindia.com www.jaypeeusa.com   Our reports are available on Bloomberg < JAYP >  Please refer to the disclaimer at the end of the report 1 NEUTRAL TARGET: ` 408  Q1FY12 Result Update CMP: ` 375  ABG Shipyard Q1FY12 sales and Ebitda as per expectation but profits dips due to increase in interest cost and depreciation On a consolidated basis ABG Shipyard Limited (ABG) Q1FY12 sales have shown growth of 16.3% YoY and decline of 1.8% QoQ to ` 5,226 mn. EBIDTA declined by 6.9% YoY but was up by 27.78% QoQ. EBIDTA margin stood at 22.7%, which contracted from 28.3% in Q1FY11 but inched up from 17.1% in Q4FY11. Interest expenses declined by 13% YoY and up 113% QoQ. Depreciation also increased by 68% YoY and 28% QoQ. Net Profit marginally grew by 4.3% YoY, 1.2% QoQ to  ` 400.6mn. We expect the revenue and profit to grow at a CAGR of 19% and 15% respectively for next two years. We give a Neutral rating to the company. Regular order book inflows, Current order book of  ` 145,000mn Key positives of ABG Shipyard are its ability to attract and retain orders. The company has recently received an order from Indian Navy for construction of two Cadet training ships worth  ` 9,700mn. It also obtained industrial license for Design and Construction of defense ships. ABG expects good orders from offshore segment along with defense orders. Order book of the company is  ` 1,45,000 mn, which provides strong position among Indian Shipyards. Strong revenue visibility till 2014 The current order book position imparts the company strong revenue visibility, and the aggressive approach of management in securing fresh orders has brought it to the position to become the largest private shipyard in India. Valuation: At the CMP of  ` 375, ASL is trading at 8.1x and 7.3x its FY12E and FY13E earnings, and 1.3x and 1.1x its expected book value. ASL currently has an order book of  ` 145,000mn, which gives the company revenue visibility till 2014 and more depending on the efficiency of the yard for timely delivery of vessels. On back of the high volume of unexecuted task, we believe ASL is well placed and the company expects ro bust orders from defense and off shore space. We value ASL at 1.2x its FY13E book value of  ` 340 per share to arrive with a 12-month target price of ` 408, implying a potential upside of 9.0% from present levels. We maintain our ‘NEUTRAL’ rating on the stock. Financials Y/E 31st March FY10 FY11 FY12E FY13E Revenue ( ` mn) 18,124 21,369 25,215 30,259 Revenue growth (%) 28% 18% 18% 20% EBITDA 4,725 5,181 5,800 6,657 EBITDA margin (%) 26.1% 24.2% 23.0% 22.0% Net Profit (Rs) 2,181 2,150 2,366 2,610 Net Profit margin (%) 12.0 10.1 9.4 8.6 EPS 42.8 42.2 46.5 51.3 P/E 8.8 9.8 8.1 7.3 ROCE 11.9 11.3 11.4 12.5 ROE 19.6 15.0 15.8 15.1 Source –Company, Jaypee Research As on Aug 11, 2011 Market Cap. (  ` mn ) 19,095 52 Week High/Low (  ` ) 498 / 226 Book Value (FY11) 253 Face Value 10 Codes BSE Code 532682 NSE Code ABGSHIP Bloomberg Code ABGS IN Reuters Code ABGS.BO Shareholding Pattern Jun2011 Mar2010 Dec2010 Promoters 61.67% 60.72% 60.35% FII 12.68% 17.15% 16.66% DII 6.56% 8.25% 8.64% Others 19.09% 13.88% 14.35% Share Price Performance 60 80 100 120 140 160 180 200 220 240      A     u     g   -      1      0      A     u     g        1      0      S     e     p        1      0      O     c     t   -      1      0      N     o     v        1      0      N     o     v   -      1      0      D     e     c        1      0      J     a     n        1      1      J     a     n   -      1      1      F     e      b        1      1      M     a     r   -      1      1      M     a     r        1      1      A     p     r   -      1      1      M     a     y        1      1      M     a     y   -      1      1      J     u     n   -      1      1      J     u      l        1      1      A     u     g        1      1 Share Price Performance ABG Nifty  Share Price Returns (%) 1M 6M 12M Absolute -0.6 13.0 47.9 Relative 6.0 15.8 52.7  Jyotsna Sawdekar  [email protected] Contact No: + 91-22-43542017 

Transcript of Report Abg

Page 1: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 1/9

ABG Shipyard Limited11 August 2011

Jaypee Research Desk

www.jaypeeindia.comwww.jaypeeusa.com

NEUTRALTARGET:` 408 Q1FY12 Result Update CMP: ` 375

ABG Shipyard Q1FY12 sales and Ebitda as per expectation but profits dips due

to increase in interest cost and depreciationOn a consolidated basis ABG Shipyard Limited (ABG) Q1FY12 sales have showngrowth of 16.3% YoY and decline of 1.8% QoQ to ` 5,226 mn. EBIDTA declined by6.9% YoY but was up by 27.78% QoQ. EBIDTA margin stood at 22.7%, whichcontracted from 28.3% in Q1FY11 but inched up from 17.1% in Q4FY11. Interestexpenses declined by 13% YoY and up 113% QoQ. Depreciation also increasedby 68% YoY and 28% QoQ. Net Profit marginally grew by 4.3% YoY, 1.2% QoQ to ` 400.6mn. We expect the revenue and profit to grow at a CAGR of 19% and 15%respectively for next two years. We give a Neutral rating to the company.

Regular order book inflows, Current order book of ` 145,000mn

Key positives of ABG Shipyard are its ability to attract and retain orders. Thecompany has recently received an order from Indian Navy for construction of two Cadet training ships worth ` 9,700mn. It also obtained industrial license forDesign and Construction of defense ships. ABG expects good orders fromoffshore segment along with defense orders. Order book of the company is ` 1,45,000 mn, which provides strong position among Indian Shipyards.

Strong revenue visibility till 2014

The current order book position imparts the company strong revenue visibility,and the aggressive approach of management in securing fresh orders hasbrought it to the position to become the largest private shipyard in India.

Valuation:At the CMP of ` 375, ASL is trading at 8.1x and 7.3x its FY12E and FY13Eearnings, and 1.3x and 1.1x its expected book value. ASL currently has an orderbook of ` 145,000mn, which gives the company revenue visibility till 2014 andmore depending on the efficiency of the yard for timely delivery of vessels. Onback of the high volume of unexecuted task, we believe ASL is well placed andthe company expects robust orders from defense and offshore space. We valueASL at 1.2x its FY13E book value of ` 340 per share to arrive with a 12-monthtarget price of ` 408 , implying a potential upside of 9.0% from present levels. Wemaintain our ‘NEUTRAL’ rating on the stock.

FinancialsY/E 31st March FY10 FY11 FY12E FY13E

Revenue ( ` mn) 18,124 21,369 25,215 30,259

Revenue growth (%) 28% 18% 18% 20%

EBITDA 4,725 5,181 5,800 6,657

EBITDA margin (%) 26.1% 24.2% 23.0% 22.0%

Net Profit (Rs) 2,181 2,150 2,366 2,610

Net Profit margin (%) 12.0 10.1 9.4 8.6

EPS 42.8 42.2 46.5 51.3

P/E 8.8 9.8 8.1 7.3

ROCE 11.9 11.3 11.4 12.5

ROE 19.6 15.0 15.8 15.1

Source –Company, Jaypee Research

As on Aug 11, 2011Market Cap. ( ` mn ) 19,09552 Week High/Low ( ` ) 498 / 226Book Value (FY11) 253Face Value 10

CodesBSE Code 532682NSE Code ABGSHIPBloomberg Code ABGS INReuters Code ABGS.BO

Shareholding PatternJun2011 Mar2010 Dec2010

Promoters 61.67% 60.72% 60.35%FII 12.68% 17.15% 16.66%DII 6.56% 8.25% 8.64%Others 19.09% 13.88% 14.35%

Share Price Performance

60

80

100

120

140

160180

200

220

240

A u g - 1 0

A u g - 1 0

S e p - 1

0

O c t - 1 0

N o v - 1 0

N o v - 1 0

D e c - 1 0

J a n - 1

1

J a n - 1

1

F e b

- 1 1

M a r - 1 1

M a r - 1 1

A p r - 1 1

M a y - 1 1

M a y - 1 1

J u n - 1

1

J u l - 1 1

A u g - 1 1

Share Price Performance

ABG Nifty

Share Price Returns (%)1M 6M 12M

Absolute -0.6 13.0 47.9Relative 6.0 15.8 52.7

Jyotsna Sawdekar [email protected]

Contact No: +91-22-43542017

Page 2: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 2/9

ABG Shipyard Limited11 August 2011

Jaypee Research Desk

www.jaypeeindia.comwww.jaypeeusa.com

Service offerings• Research and Advisory

ValuationValuation FY10 FY11 FY12E FY13E

P/E 8.8 9.8 8.1 7.3

Dividend Yield 1.1 1.1 1.1 1.1P/ BV 1.7 1.5 1.3 1.1

EV / EBITDA 8.8 6.9 7.0 6.5

EV / Sales 2.6 1.8 1.7 1.5

Market Cap/ Sales 1.1 0.9 0.8 0.6

Q1FY12 Highlights ABG Shipyard has delivered 4 vessels in Q1FY12. Bulker capacity is full and hence the company wont be able to take more

orders in this segment.

Other HighlightsMinistry of Commerce & industry has awarded industrial Licenses for Design &Construction of Defense ships to the Company. The Company is qualified forbuilding: Naval Warships and Naval Support Ships etc. Submarines and Underwater Vessels. Fast attack Crafts, Weapons and Equipment including their Mounts, turrets, launchers, etc.

along with associated systems, sub-systems and all types of assemblies forNavy, Army and the Air Force.

Command Control Communication Computers and intelligence (C41)

systems, Sub-systems, etc. for the Navy, Army and the Air Force. Propulsion system, Subsystems etc. for Naval Ships.

Also licenses are issued for the Surat as well Dahej shipyards of the Company.ABG is one of the few yards that are being approved for submarine productionas well. This opens a major opportunity for Defense shipbuilding in India,which is the one of the long term objective.

Key Concerns: Orders inflows going forward

Sensitivity table

Sensitivity to 10%change in Re-pricing

Re-pricing at 10%discount

Pricing at ParRe-pricing at 10%

premium

On FY12E EPS 37.9 46.5 55.0

On FY13E EPS 33.1 51.3 71.3

Source –Company, Jaypee Research

Page 3: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 3/9

ABG Shipyard Limited11 August 2011

Jaypee Research Desk

www.jaypeeindia.comwww.jaypeeusa.com

Service offerings• Research and Advisory

Quarterly performance` mn Q1FY12 Q1FY11 YoY% Q4FY11 QoQ%

Net Sales 5,226 4494.5 16.3 5,320 (1.8)

Other Income 28 25.0 11.2 0 30,788.9

Total Income 5,254 4519.5 16.2 5,320 (1.2)

Consumption Material Stores 3,233 1142.0 183.1 2,612 23.8

Other Expenditure 972 610.2 59.2 1,336 (27.3)

Staff Cost 191 139.3 37.0 188 1.7

Inc / Dec in stock (328) 1358.1 (124.2) 277 (218.6)

Total Expenditure 4,067 3249.6 25.2 4,412 (7.8)

EBIDTA (without other income) 1,159 1244.9 (6.9) 908 27.7

EBIDTA 1,187 1269.9 (6.5) 908 30.7

Interest 364 420.7 (13.4) 170 113.7

PBDT 823 849.2 (3.1) 737 11.6

Depreciation 230 136.6 68.2 179 28.0

PBT before Exceptional Item 593 712.6 (16.8) 558 6.3

Exceptional Items - -137.5 - 0 (100.0)

PBT 593 575.1 3.1 558 6.3

TAX (192) (191.0) 0.7 (162) 18.8

Reported Profit After Tax 401 384.1 4.3 396 1.2

Extra Ordinary Items - 0.0 - - -

Adjusted Profit after Extraordinary Items 401 384.1 4.3 396 1.2

Equity 509 509.2 509

EPS (Adj. Profit) 8 7.5 8

EPS (Cash EPS) 12 10.2 11

OPM 22.7 28.3 17.1

OPM ( w/o OI) 22.2 27.7 17.1

NPM (RPAT) 7.7 8.5 7.4

NPM ( Adj. PAT) 7.7 8.5 7.4

Source –Company, Jaypee Research

Page 4: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 4/9

ABG Shipyard Limited11 August 2011

Jaypee Research Desk

www.jaypeeindia.comwww.jaypeeusa.com

Service offerings• Research and Advisory

Income Statement Cash Flow Statement` mn FY11 FY12E FY13E ` million FY11E FY12E FY13E

Revenue (Rs mn) 21,369 25,215 30,259 PBT before extraord Items 2,883 3,155 3,625

Revenue growth (%) 17.9% 18.0% 20.0% Add: Depreciation 685 865 960

EBITDA 5,181 5,800 6,657 Add:Others 1,458 1,867 2,178

EBITDA margin (%) 24.25% 23.00% 22.00% Operating profit before WC changes 4,815 5,887 6,763

Depreciation 685 865 960 Change in WC 7,172 (11,074) (4,583)

EBIT 4,496 4,934 5,696 Cash generated from operations 11,987 (5,188) 2,180

Other income 54 87 106 Other (1,124) (789) (1,015)

Interest 1458 1867 2178 Cash flow from operating activities 10,863 (5,976) 1,165

PBT 2,883 3,155 3,625 Cash flow from investing activities (53) 3,244 (1,000)

Tax (914) (789) (1,015) (I/D) working long term borrowings (3,551) 3,598 15

Adj. PAT 2,150 2,366 2,610 Cash flow from financing (4,444) 1,400 (2,401)

I/D in cash and cash equivalents 6,366 (1,332) (2,236)

Balance Sheet Cash at beginning of year 284 6,649 5,318 ` mn FY11 FY12E FY13E Cash at end of the year 6,649 5,318 3,082

Sources of Funds

Share Capital 509 509 509

Reserves 12,398 14,433 16,804 Key RatiosShareholders funds 12,907 14,942 17,313 Year ended 31-Mar FY11 FY12E FY13E

Debt 25,424 29,022 29,037 Profitability RatiosTotal Liabilities 38,374 44,007 46,394 EBITDA margin (%) 24.2 23.0 22.0

Net Profit margin (%) 9.1 9.4 8.6

Application of Funds ROE (%) 15.0 15.8 15.1

Gross Block 10,627 12,127 13,127 ROCE (%) 11.3 11.4 12.5

Depreciation 2,064 2,930 3,890 Net Sales Growth (%) 17.9% 18.0% 20.0%

Net Fixed Assets 23,808 9,198 9,237 Net Profits Growth (%) -11.1% 22.0% 10.3%

Capital WIP - 10,500 10,500 D/E Ratio 2.0 1.9 1.7Investments 2,006 2,006 2,006 Valuation Ratios

Current Assets P / EPS 9.8 8.1 7.3

Inventories 24,895 21,278 25,865 P / Cash EPS 7.3 5.9 5.3

Sundry Debtors 1,636 904 1,099 EV/ EBIDTA 7.3 7.4 6.8

Other Current Assets - - - P / BVPS 1.5 1.3 1.1

Cash and Bank Balance 6,649 5,318 3,082

Loans and Advances 18,184 23,937 29,098

sub-total 51,364 51,437 59,144

Less : Current Liabilities & Provisions

Current Liabilities 34,119 24,862 30,222

Provisions 652 238 238

sub total 34,770 25,100 30,460 Net Current Assets 16,594 26,337 28,684

Misc Expenses - - -

Deferred Tax Asset (4,033) (4,033) (4,033)

Total Assets 38,374 44,007 46,394

Source – Company, Jaypee Research

Page 5: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 5/9

Page 6: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 6/9

Page 7: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 7/9

ABG Shipyard Limited11 August 2011

Jaypee Research Desk

www.jaypeeindia.comwww.jaypeeusa.com

Service Offerings:• Research & Advisory• Execution• Corporate Access & Events

Disclaimer:

This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as anofficial confirmation of any transaction. This document is subject to changes without prior notice and is intended only for

the person or entity to which it is addressed and may contain confidential and/or privileged material and is not for any

type of circulation. Any review, retransmission, or any other use is prohibited.

The information contained herein is from publicly available data or other sources believed to be reliable. While we would

endeavor to update the information herein on reasonable basis, Jaypee Capital Services Limited, its subsidiaries and

associated companies, their directors and employees are under no obligation to update or keep the information current.

Also, there may be regulatory, compliance, or other reasons that may prevent Jaypee Capital Services Limited and

affiliates from doing so. We do not represent that information contained herein is accurate or complete and it should not

be relied upon as such. This document is prepared for assistance only and is not intended to be and must not alone betaken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each

recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation

of an investment in the securities of companies referred to in this document (including the merits and risks involved).

The investment discussed or views expressed may not be suitable for all investors. It does not have regard to the specific

investment objectives, financial situation and the particular needs of any specific Person/ Institutions etc. who may

receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or

investment strategies discussed or recommended in this report and should understand that statements regarding future

prospects may not be realized and there is substantial risk of loss. Jaypee Capital Services Limited does not takeresponsibility thereof. This is further clarified that no kind of negligence, misconduct or default whatsoever on the part of

Jaypee Capital Services Limited can be attributed by any person on the basis of this research publication or any part

thereof.

Reports based on technical analysis centers on studying charts of a stock's price movement and trading volume, as

opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals. Affiliates of Jaypee Capital Services Limited may have issued other reports that are inconsistent with and

reach different conclusions from, the information presented in this report.

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 Jaypee Capital Services Limited 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 a certain category of investors. Persons in whose possession this document may come are required to

Page 8: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 8/9

ABG Shipyard Limited11 August 2011

Jaypee Research Desk

www.jaypeeindia.comwww.jaypeeusa.com

Service Offerings:• Research & Advisory• Execution• Corporate Access & Events

inform themselves of, and to observe, such applicable restrictions. Though disseminated to all the customers

simultaneously, not all customers may receive this report at the same time. Jaypee Capital Services Limited will not treat

recipients as customers by virtue of their receiving this report.

We and our affiliates, officers, directors, and employees will from time to time have long or short positions in, act as

principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies

to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this

research. Our asset management area, our proprietary trading desks and investing businesses may make investment

decisions that are inconsistent with the recommendations or views expressed in this research.

Our research personnel may participate in company events such as site visits and are generally prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research Management.

Trading in securities, futures, options or other financial instruments entails significant risk and is not appropriate for all

investors. Electronic trading also entails significant risk. Losses may exceed the principal invested, and the past

performance of a security, industry, sector, market, or financial product does not guarantee future results or returns.

“Jaypee” refers to all of Jaypee’s worldwide branches and subsidiaries. Jaypee International Inc. is a member of BATS,CBOT, CME, COMEX, ECX, EUREX, ICE, LME, NASDAQ, NYSE LIFFE, SGX, TOCOM. Jaypee International Inc. is alsomember of FINRA, NFA and SIPC and is regulated by SEC and CFTC in USA. Jaypee Capital Services Limited is a member of USE, NSE and BSE and is regulated by SEBI in India. Indian services are offered through Jaypee Capital Services Limited.Not all services are available from all Jaypee organizations or personnel. Kindly consult your local office for details.

Recommendation Structure:

A Buy recommendation implies an upside of 10% or more from the current levels.

A Sell recommendation implies a downside of 10% or more from the current levels.

A Neutral recommendation implies an upside/downside of less than 10% from the current levels.

Page 9: Report Abg

8/2/2019 Report Abg

http://slidepdf.com/reader/full/report-abg 9/9

ABG Shipyard Limited11 August 2011

Jaypee Research Desk

www.jaypeeindia.comwww.jaypeeusa.com

Service Offerings:• Research & Advisory• Execution• Corporate Access & Events

Jaypee Offices Worldwide:

New York

150 BroadwaySuite 2200

New York, NY 10038

+1 212 537 6271

[email protected]

Chicago

30 South Wacker Drive

Suite 1700

Chicago, IL 60606

+1 312 254 5044

[email protected]

Delhi NCR

11th Floor, Building - 9A

DLF Cyber City, Phase III

Gurgaon - 122 002, India

+91 124 3075 880

[email protected]

Mumbai

505, Arcadia195, Nariman Point,

Mumbai - 400 021, India

+91 22 4354 2000

[email protected]

Singapore

2 Shenton Way

#10-02 SGX Centre 1

Singapore 068804

+65 6438 0095

[email protected]