SECTOR REPORT
150000 100000 50000 0 Sep-08 Nov-08 Dec-09 Feb-10 Aug-09 Oct-09 Sep-07 Apr-08 Jun-08 Apr-09 Jun-09 Nov-07 Feb-08 Jan-09 Feb-09 Apr-10 Jul-08
(Rs mn)
Revenues FY11E FY12E 41,315 28,499 24,352 46,030 32,684 25,321 PAT FY11E FY12E 6,443 6,226 711 7,312 7,429 1,142 EPS (Rs) FY11E FY12E 15.2 40.9 2.9 17.3 48.8 4.7 NAV# (Rs) P/E(x) Current FY11E FY12E 135 287 20 10.8 7.4 16.2 9.6 6.2 10.0 EV/EBIDTA (x) FY11E FY12E 6.2 7.3 5.3 5.2 6.2 3.6 ROE(%) FY11E FY12E 10.0 10.4 2.5 11.0 11.4 3.3
Chetan Kapoor
+91-22-4322 1232
chetan.kapoor@idbicapital.com
1
Contents
Page No. Shipping Sector Tanker markets: Recovery in sight only by 2012 .......................................................................................................................................... 5 Dry-bulk markets: Charter rates likely to settle down .................................................................................................................................. 10 Container Shipping: Rates gaining ground on a weak foundation .................................................................................................................. 14 Indian Shipping Scenario ............................................................................................................................................................................ 17 Companies Covered Great Eastern Shipping Ltd. Summary ................................................................................................................................................................................................... 19 Investment Highlights ................................................................................................................................................................................. 19 Background ............................................................................................................................................................................................... 20 Operational Highlights ................................................................................................................................................................................. 21 Valuations ................................................................................................................................................................................................. 23 Financials ................................................................................................................................................................................................... 24 Financial Summary .................................................................................................................................................................................... 26 Shipping Corporation of India Ltd. Summary ................................................................................................................................................................................................... 29 Investment Highlights ................................................................................................................................................................................. 29 Background ............................................................................................................................................................................................... 30 Operational details ...................................................................................................................................................................................... 31 Valuations ................................................................................................................................................................................................. 33 Financials ................................................................................................................................................................................................... 34 Financial Summary .................................................................................................................................................................................... 35 Mercator Lines Ltd. Summary ................................................................................................................................................................................................... 37 Investment Highlights ................................................................................................................................................................................. 37 Background ............................................................................................................................................................................................... 38 Valuations ................................................................................................................................................................................................. 40 Financials ................................................................................................................................................................................................... 41 Financial Summary .................................................................................................................................................................................... 42 Varun Shipping Ltd. Summary ................................................................................................................................................................................................... 43 Investment Highlights ................................................................................................................................................................................. 43 Background ............................................................................................................................................................................................... 44 Financial Summary .................................................................................................................................................................................... 45 Appendix 1: Shipping Sector Stats ............................................................................................................................................................. 46 Appendix 2: Global Peer Set ...................................................................................................................................................................... 47 Disclaimer .................................................................................................................................................................................................. 48
Source: Clarkson
Source: Clarkson
The boom in the shipping tonnage addition was led by the demand for commodities by Japan and Europe in the 1960s. The demand push for Tankers was further amplified due to growth in oil imports by US. This led to an order of 129.5 mn dwt by 1973. Remarkably, the historical data shows us that the deliveries lagged the ships on order so much so that only 60 mn dwt of tonnage was delivered. We expect a re-run of the 1970s wherein the delivery of the tonnage can show a shortfall of ~40% from the actual orders.
(%)
The world merchant fleet which on a consolidate basis stands at about 1,234 mn dwt and has seen an average growth of 6.9% pa is expected to see a substantial addition in excess of 9% in the next couple of years. Figure: Worldwide tonnage growth since 2006: substantial growth
1400 1200 1000 (mn dwt) 800 600 400 200 0 Oil tankers 6.3 -4 452 8.5 Chemical tankers 40.8 Liquid gas tankers 451.2 Bulk/OBO carriers 169.5 Container General ships 13.9 7.2 11 2.1 105.8 cargo ships 1.7 6.4 Passenger 1234.2 Total 6.9 45 35 25 15 5 -5 -15 (%)
mn dw t 2010
Source: ISL - LR Fairplay
Figure: Total seaborne cargo: Crude oil forms the major share
Container 15% Crude oil and General cargo, ro-ro 10% gas 37%
Cruise Reefer RoRo 1% 5% Chemicals 2% 6% Car 5% LNG 7% LPG 2% Container Bulk 24%
ships
Tankers 25%
23%
United States
Other Countries
Figure: Demand side projections: Tonne mile growth to clock ~4% CAGR
20 10 0 -10 -20 -30 1980 1984 1988 1992 1996 2000 2004 2008 2012 Tonne mile grow th % World oil demand grow th
Source: IMF, IEA, Fearnleys
7000 6000 5000 (miles) 4000 3000 2000 1000 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 Av erage Distance miles
(%)
Rest of World * North America Asia Pacific 3% 11% 10% South & Central West Africa America 8% 7% North Africa 5% Europe 4% Former Sov iet Union 17% Middle East 35%
(Nos.)
Dec-08
Mar-09
Jan-09
Feb-09
Jun-09
Aug-09
VLCCs
Source: Intertanko
May-09
Suezmax
LR2/Aframax
Supply side
The tanker supply has seen a growth of 6.6% CAGR over 2006-2010 which expected to increase to approach double digit numbers by 2010. By the end of 2009, the world tanker fleet (crude and products) reached 452 mn dwt which is 37% of world shipping fleet. According to minimum phase-out estimates even if all the tankers are phased out by 2010 and assuming 4% increase in tonne mile demand we have a scenario of oversupply in tanker tonnage. Figure: Projection tanker fleet based on current orderbook and phase out (above 25,000 dwt)
600 500 (mn dwt) 300 200 100 0 2002 2004 2006 2008 2010 2012 2014 Fleet
Source: Intertanko and ISL Fairplay
270 278
400
450 400 350 300 250 200 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 VLCC Suezmax Aframax Panamax
341 360
(mn dwt)
400
163.4
439.1
Sep-09
LR1/Panamax
VLCC
Suezmax
Source: Industry
88.3
Oct-09
Apr-09
Jul-09
14
(%)
Cargo grow th
IRR - Clean
IRR - VLCC
IRR - Aframax
We have worked upon the following assumption: TCE & OPEX remain constant 5 yr old Second Hand Vessels are bought Vessels are used for 15 years and then sold/salvaged Insurance cost @1% of Book Value Loan Repayment is EMI Based, payable quarterly for 8 years Table: Charter rates for 10% IRR
Tankers VLCC Suezmax Aframax Clean
Source: BRS; IDBI Capital Market Services
Source: Dryships
10
(%)
(mn tonnes)
60 40 20 0
20 10
Oct-08 Dec-08
Oct-07 Mar-08
May-09 Jun-09
0
Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
11
CIOITTAL Index
Source: Bloomberg
Tonnage supply
Effective tonnage supply growth The dry-bulk tonnage which currently stands at 463 mn dwt is expected to see significant additions in CY10. We expect an effective tonnage supply for the year 2010 and 2011 which is in excess of 10.8% YoY. But slippages are more rampant in case of the dry-bulk segment and a repetition of 40% slippage seen in CY09 cannot be ruled out. Figure: Dry-bulk tonnage addition schedule
700 600 500 400 300 200 100 0 463 172 144 122 278 92 123 27 13 9 5 2010E Handysize 2011E Total 2012E 62 60 46 47 77 94
(mn dwt)
37
23
23
14
27
17
Capesize
Panamax
Ex isting Fleet
Source: Industry
Handymax
Order book
Figure: Significant mismatch expected in effective supply growth in tonne mile growth
12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Effectiv e supply grow th
Source: CESA; IDBI Capital Market Services
2002
2003
2004
2005
2006
2007
2008
2009
2010E
2011E
Dry Bulk Fleet (mn dwt) 277.8 71.3 42.5 40% 60% 118.6 18.4 9.9 46%
No of ships 3,165 964 531 45% 55% 1,438 218 119 45%
12
61
IRR - Capesize
Source: IDBI Capital Market Services
IRR - Panamax
IRR - Supramax
We have worked upon the following assumption: TCE & OPEX remain constant 5 yr old Second Hand Vessels are bought Vessels are used for 15 years and then sold/salvaged Insurance cost @1% of Book Value Loan Repayment is EMI Based, payable quarterly for 8 years Table: Charter rates per 10% IRR
Dry-bulk Capesize Panamax Supramax
Source: IDBI Capital Market Services
13
Source: Bloomberg
14
On the supply side, in 1QCY10 only about 17% of scheduled deliveries materialized, which, if replicated for the rest of the year, suggests that only 60-70% of scheduled deliveries will actually happen in 2010. Figure: Recovery in container trade
Port of Long Beach Inland Containers Index 400000 350000 300000 250000 200000 150000 100000 50000 0 6/30/2007 8/31/2007 2/29/2008 4/30/2008 6/30/2008 8/31/2008 2/28/2009 4/30/2009 6/30/2009 8/31/2009 2/28/2010
8m09
10/31/2007
12/31/2007
10/31/2008
12/31/2008
10/31/2009
Source: Bloomberg
Tankers
Source: Clarkson World Shipyard Monitor
Bulkers
LNG
LPG
Containers
12/31/2009
Others
4/30/2010
100 50 0
100 50 0 30-Apr-02 31-Oct-02 30-Apr-03 31-Oct-03 30-Apr-04 31-Oct-04 30-Apr-05 31-Oct-05 30-Apr-06 31-Oct-06 30-Apr-07 31-Oct-07 30-Apr-08 31-Oct-08 30-Apr-09 31-Oct-09 30-Apr-10 Supramax Panamax Capesize
45k Clean
Aframax
VLCC
also there are good chances that vessels will not be delivered
In 2009 we had a seen good part of order delayed due to order cancellation and delays in execution. Figure: Increase in order cancellations
120000 100000 (Thousand dwt) 80000 60000 40000 20000 0 Tankers Bulk Carrier Container Ships General Cargo 2008 - 1000 dw t
Source: ISL Fairplay
95772
6973
14349
10953
3861 4990
913
1879
44
50
16
Source: Bloomberg
30100 19910
29000
2000
2730
GESCO(Stand)
GESCO(Cons)
Mercator
Varun
17
Companies Covered
COMPANY REPORT
Analyst Chetan Kapoor +91-22-4322 1232
chetan.kapoor@idbicapital.com
BUY
Summary
GE Shipping (GESCO), India's largest private sector shipping company has had a successful track record of maintaining profitability despite severe fall in rates. We expect the company to be able to successfully hedge its earnings by growing its fleet in offshore space, which currently has owned fleet strength of 14 assets through its subsidiary Greatship India. We believe that offshore will contribute to almost 45% of FY11E PBIT. With likely listing of the offshore subsidiary we expect a value unlock in the near term. We recommend a BUY on the stock with target of Rs 376, a 23% upside.
Investment Highlights
Listing of the offshore subsidiary to provide value unlocking
GESCO plans to list its offshore subsidiary Greatship India. The subsidiary currently has 14 owned assets and 2 in-chartered assets under management. Post the leftover capex of US$ 362 mn the company will have total owned assets strength of 23 vessels. The listing of the offshore subsidiary is expected to further unlock value.
Greater exposure to the tanker segment to provides better long term visibility
On a standalone basis GESCO currently books ~85% of its revenues from the tanker segment. We believe that despite a bleak near term scenario the tanker segment is likely to achieve better rates in the longer terms (beyond two years). We believe that the tanker cycle is currently at its trough and is less likely to go further down from here.
Valuation
We have done the valuation on the SOTP basis due to disparateness in the shipping and offshore business. The shipping business has been valued on the basis of P/NAV basis whereas offshore has been accorded 9x FY11E, PE based on the global peerset valuations.
(Rs mn)
FY08 31,308 13,856 9,689 63.6 4.8 4.4 FY09 38,008 15,496 10,846 71.2 4.3 4.3 FY10 28,565 9,401 5,390 35.4 8.6 8.8 FY11E 28,499 11,237 6,226 40.9 7.4 7.3 FY12E 32,684 13,324 7,429 48.8 6.2 6.2
19
Background
G E Shipping is India's largest private sector shipping service provider. G E Shipping initially promoted by two families - the Sheths and the Bhiwandiwallas, who started GESCO to help expand the reach of their trading businesses. The company started its shipping operations in 1948, after obtaining the mothballed Liberty ship, SS Fort Elice. GESCO has a diverse asset base with presence in the crude, product, dry bulk and offshore segments. GESCO has a presence in the offshore business through the wholly owned subsidiary Greatship India Ltd. The company's management is constituted by Mr K M Sheth, Chairman, Mr Bharat Sheth, Managing Director and Mr Ravi Sheth, Managing Director of Greatship India. Diagram: Fleet details
Type of vessel
Shipyard STX Cosco Cosco STX SPP Hyundai Hyundai CDL CDL CDL Keppel Keppel Mazgaon Dock Mazgaon Dock Drydock World, Singapore Drydock World, Singapore
332
326
AHTSV
36 939
20
Operational Highlights
Figure: Avg TCY movement for the company's fleet: Expected to remain in a similar range
60000 50000 40000 30000 20000 10000 0 Q1FY07 Q3FY07 Q1FY08 Q3FY08 Q1FY09 Q3FY09 Q1FY10 Crude
Source: Company reports; IDBI Capital Market Services
Greatship Fleet 10 4 8 1 23
The charter rate scenario in the offshore markets is expected to be more robust as compared to the shipping sector. Orderbook situation is much less alarming in case of offshore vessels.
21
The orderbook in case of AHTSV and PSV category of vessels stands at 15.4% and 10.7% of existing fleet. Also about 48% and 40% of the existing fleet is above 25 years in the case of AHTSV and PSVs respectively. Hence relatively lower additions in the shipping tonnage are expected to sustain the current levels in charter rates. Figure: Greatship revenue breakup: Rigs and the MSVs to constitute a major share of revenues
100% 80% 60% 40% 20% 0% FY10E PSV
Source: IDBI Capital Market Services
22
Valuation
We have valued GESCO on SOTP basis, providing a multiple of 1x to the NAV of the shipping fleet and a multiple of 9x FY11E PE to the offshore subsidiary. We believe that asset prices are already at the trough level with a modest recovery underway a multiple of 1x NAV is justified at these levels. Table: Valuation
NAV of the shipping fleet (Rs) PAT for Greatship India (FY11E) (Rs mn) Multiple (x) Contribution from Greatship (Rs mn) After holding company discount (30%) Total Value (Rs mn) Value per share (Rs)
Source:
1 Year forward EV/EBIDTA chart (standalone): May be distorted due to Greatship contribution missing Figure: P/NAV has remained in the 0.5x to 1x NAV range
700 600 500 400 300 200 100 0 31/03/2007 30/06/2007 30/09/2007 31/12/2007 31/03/2008 30/06/2008 31/09/2008 31/12/2008 31/03/2009 30/06/2009 30/09/2009 31/12/2009
PRICE
Source: IDBI Capital Market Services
.5NAV
1NAV
Close Price
Source: IDBI Capital Market Services
Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10
EV/EBIDTA +1 Std dev Mean -1 std dev
1XBV
1.5XBV
.5XBV
23
Financials
Revenue contribution likely to be skewed towards offshore
The dependence upon offshore revenues is expected to escalate over the next couple years with the stagnation in the shipping charter rates. Fleet accretion in the offshore segment is expected to increase its contribution with the charter rates likely to remain stable. Fig.: Dependence upon offshore revenue to increase
100% 80% 60% 40% 20% 0% FY09 FY10 FY11E Shipping
Source: Company reports; IDBI Capital Market Services
FY12E Offshore
2008
2009 Crude
2010 Product
2011E Gas
2012E Dry
The GESCO standalone revenues are expected to remain depressed in the next two years. Greatship revenues are expected to grow exponentially on the back of fleet addition though the EBIDTA margins are expected to stabilize in the range of 36%. Fig.: GESCO standalone: revenue to remain stagnant
30000 25000 (Rs mn) 20000 15000 10000 5000 0 2006 2007 2008 2009 2010 2011E2012E Income from operations
Source: IDBI Capital Market Services
60 50 40 30 20 10 0
60 50 40 30 20 10 0
EBITDA margin
FY10
FY11E
24
Leverage
The DSCR and the interest coverage ratios of the company are at ~1.2x and 3.7x for FY11E. We believe that GESCO (consolidated) is in a comfortable position to provide for the long term obligations. Figure: Interest cover and DSCR (consolidated): comfortably placed
8 7 6 5 4 3 2 1 0 0.4 FY09 7.1
3.8 1.2
3.7
3.5 1.3
0.6
25
(Rs mn)
(Rs mn)
FY09 38,008 21.4 -22,512 15,496 15,496 11.8 -4,540 2,190 13,146 -1,847 11,300 3,231 14,531 -454 14,077 10,846 11.9 101 14,178
FY10 28,565 -24.8 -19,165 9,401 9,401 -39.3 -4,246 2,808 7,963 -2,123 5,840 -294 5,546 -450 5,096 5,390 -50.3 32 5,128
FY11E 28,499 -0.2 -17,262 11,237 11,237 19.5 -5,175 2,656 8,718 -2,368 6,350
FY12E 32,684 14.7 -19,360 13,324 13,324 18.6 -5,770 3,065 10,619 -3,010 7,609
Dividend (incl. tax) Other financing activities Cash flow from financing (c) Net chg in cash (a+b+c)
Key ratios
Year-end: March EPS (Rs) Adjusted for sale of ships EPS growth (%) EBITDA margin (%) EBIT margin (%) ROCE (%) Net debt/Equity (%) FY09 71.2 11.9 40.8 34.6 15.9 39.1 FY10 35.4 -50.3 32.9 27.9 7.7 63.5 FY11E 40.9 15.5 39.4 30.6 7.6 47.8 FY12E 48.8 19.3 40.8 32.5 8.4 48.6
Balance Sheet
Year-end: March Current assets Investments Net fixed assets Other non-current assets Total assets Current liabilities Total Debt Other non-current liabilities Total liabilities Share capital Reserves & surplus Less: Misc. expenditure Shareholders' funds Minorities interests Total equity & liabilities
26
(Rs mn)
FY09 27,134 3,023 75,800 105,956 10,976 42,659 53,635 1,642 50,679 52,321 105,956
FY10 21,848 21,789 75,034 7 118,678 7,879 53,702 61,580 1,605 55,493 57,098 118,678
FY11E 33,453 3,058 88,860 125,371 5,935 57,360 63,295 1,523 60,553 62,076 125,371
FY12E 38,163 3,058 99,125 140,345 7,121 65,196 72,317 1,524 66,504 68,028 140,345
Valuations
Year-end: March PER (x) PCE (x) Price/Book (x) Yield (%) EV/Net sales (x) EV/EBITDA (x)
Source: Company reports; IDBI Capital Market Services
(Rs mn)
(Rs mn)
FY09 28,363 9.9 -13,729 14,634 14,634 15.2 -4,185 1,924 12,373 -1,536 10,836 3,361 14,197 -450 13,747 10,386 12.9 101 13,848
FY10 18,822 -33.6 -11,275 7,547 7,547 -48.4 -3,465 1,899 5,982 -1,430 4,553 -233 4,320 -392 3,928 4,161 -59.9 29 3,957
FY11E 17,884 -5.0 -11,877 6,007 6,007 -20.4 -3,908 1,800 3,899 -1,346 2,554
FY12E 20,337 13.7 -12,397 7,940 7,940 32.2 -4,162 1,900 5,678 -1,829 3,849
FY12E 3,849 4,162 329 -135 8,205 -14,379 -1,180 -15,560 -7,355
Dividend (incl. tax) Other financing activities Cash flow from financing (c) Net chg in cash (a+b+c)
Key ratios
Year-end: March EPS (Rs) Adjusted for sale of ships EPS growth (%) EBITDA margin (%) EBIT margin (%) ROCE (%) Net debt/Equity (%) FY09 68.2 12.9 51.6 43.6 16.9 25.0 FY10 27.3 -59.9 40.1 31.8 7.0 43.7 FY11E 16.2 -40.8 33.6 21.8 4.3 30.0 FY12E 24.4 50.7 39.0 27.9 5.8 42.6
Balance Sheet
Year-end: March Current assets Investments Net fixed assets Other non-current assets Total assets Current liabilities Total Debt Other non-current liabilities Total liabilities Share capital Reserves & surplus Less: Misc. expenditure Shareholders' funds Minorities interests Total equity & liabilities 87,884 96,046 94,639 49,282 53,711 55,599 38,602 1,523 47,759 42,336 1,523 52,188 39,040 1,523 54,076 87,884 7,936 30,666 96,046 5,647 36,689 94,639 3,127 35,913 FY09 21,634 12,510 53,740 FY10 15,281 32,510 48,255 FY11E 21,848 20,678 52,113
(Rs mn)
FY12E 22,973 21,858 62,330 107,162 3,645 45,073 48,718 1,523 56,921 58,444 107,162
Valuations
Year-end: March PER (x) PCE (x) Price/Book (x) Yield (%) EV/Net sales (x) EV/EBITDA (x)
Source: Company reports; IDBI Capital Market Services
COMPANY REPORT
Analyst Chetan Kapoor +91-22-4322 1232
chetan.kapoor@idbicapital.com
HOLD
Summary
Shipping Corporation of India (SCI) a Navratna PSU is one of the least leveraged plays in shipping space in India. The company has India's largest shipping fleet has a major presence in the tanker segment. Currently having an aged fleet (average age ~19 years) the company has on order 38 vessels which will bring down its fleet age to <15 years by end of FY12. Its container shipping segment continues to be in losses due to a highly competitive sector which is reeling from overcapacities. SCI management though expects to turn around the container/liner segment by FY12 which we believe will be difficult task to achieve though the rates/TEU have improved. We initiate coverage with a HOLD rating on the stock.
Investment Highlights
Lowest leverage in the shipping space
SCI's conservative policy has helped it maintain a low leverage with a Net debt to equity position at ~0.1x. Though with a substantial capex planned in the next three years the company's leverage is expected to increase. Still the DSCR is reasonably positioned at about 1.5x in FY11E and equity infusion at this juncture may help it revamp and expand its fleet further when the asset prices are low.
Key Stock Data Sector Shipping Bloomberg/Reuters SCI IN / SCI.BO Shares o/s (mn) 423.5 Market cap (Rs mn) 69,878 Market cap (US$ mn) 1,512 3-m daily average vol. 73,124 Price Performance 52-week high/low -1m Absolute (%) 6.1 Rel to Sensex (%) (1.9) Shareholding Pattern (%) Promoters FIIs/NRIs/OCBs/GDR MFs/Banks/FIs Non Promoter Corporate Public & Others
Stock vs Relative to Sensex
Price (Rs.)
160 140 120 100 80 60 40 20 0 Dec-09 Oct-09 Aug-09 Sep-09 Feb-10 Mar-10 Jun-09 Jan-10 Apr-10 Nov-09 May-10 Jun-10 Jul-09
Divestment candidate
SCI is a divestment candidate which currently has ~80% government holding. Also with the current guidelines of more than 25% public shareholding we expect SCI to explore ways its float soon.
Valuation
We have valued the stock on an EV/EBIDTA basis providing 7.5x multiple to FY11E EBIDTA which provides us a target price of Rs 170. We have provided a 10% discount to the global tanker shipping companies which have a median multiple of 8.3x CY11E. Table: Financial snapshot (Rs mn)
Year-end: March Net sales EBIDTA Adjusted net profit EPS (Rs) P/E (x) EV/EBIDTA (x) FY08 37,268 9,112 7,275 17.2 9.6 8.6 FY09 41,666 10,844 9,304 22.0 7.5 6.0 FY10 34,631 4,690 2,534 6.0 27.6 13.0 FY11E 41,315 9,887 6,443 15.2 10.8 6.2 FY12E 46,030 11,749 7,312 17.3 9.6 5.2
29
Sensex
SCI
Background
The Shipping Corporation of India was established in 1961 by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. Starting out as a marginal Liner shipping company with just 19 vessels, the SCI today has 77 ships of 5.1 mn dwt with interests in almost all segments of the shipping trade. In addition, SCI mans/manages 60 vessels of 0.2 million tonnes DWT. The SCI owns and operates about 33% of the Indian tonnage servicing both national and international trades. Over the years it has diversified into a large number of areas, and is today the only Indian shipping company providing overseas break-bulk and container services to Indian trade. The SCI operates shipping services in various segments viz. container, break-bulk, crude oil & products, dry bulk, LPG / Ammonia, Phosphoric Acid / Chemicals, LNG, coastal passenger transportation, offshore logistic support services and other coastal services.
Management
The SCI Board is headed by the Chairman and Managing Director, Mr S.Hajara, 5 full time directors heading the divisions and 10 part time directors (2 official and 8 non-official) nominated by Government of India. Diagram: Fleet details
30
Operational details
Bulk
SCI currently has had a higher share of tankers in its fleet which is expected to undergo significant revamp post the acquisition plan. The average age of the bulk fleet is expected to reduce post acquisition to 14 years from current 18 years. In bulk operations the company is mainly catering to the cargo originating from the Indian subcontinent.
Liner
The company's liner operations are largely concentrated in the Asia-Europe route. Besides five owned vessels with 14,407 TEUs of owned capacity the company also has also an in-chartered fleet of about 5 vessels. SCI has actively renegotiated the older charters and working on a loss mitigation plan in the Liner business. Table: Liner services details
Name Indian subcontinent services (ISES) Consortium Service Partner MSC Weekly Capacity of vessels 2750-3500 Allocation per week 1650 Port rotation
Colombo / JNP / Mundra / Salalah / Port Said / Barcelona / Hamburg / Rotterdam / Felixstowe / Port Said / Jeddah / Colombo NSICT /Colombo / Singapore / Susan / Shanghai / Ningbo / Hong Kong / Singapore / Port Kelang / Colombo / NSICT Chennai / Vizag / Singapore / Hong Kong / Shanghai / Dalian / Xingang / Qingdao / Hong Kong / Shekou / Singapore / Port Kelang and Chennai Colombo / Tuticorin / Cochin / Nhava Sheva / Mundra / Jebel Ali / Mundra / Cochin / Tuticorin / Colombo Mundra - Nhava Sheva - Jeddah Port Sudan - Hodeidah - Djibouti -Aden - Salalah - Mundra. When there is adequate inducement, the SCI vessels in the service call at Eilat. Kolkota/Haldia-colombo
Weekly
1950-2250
750
Weekly
2100-2200
440
SCI Middle East India Liner Express (SMILE) service India - Red Sea Service
Independent
Weekly
1800
1800
12 Days
1100-1700
775
SCIMAX
Source: Company reports
700
Others
SCI has a fleet of 10 offshore vessels with an average fleet of 25 years; these are currently employed in the Indian waters with ONGC. It also services about 21 vessels of ONGC. The Liner segment also includes the passenger transport services both owned by SCI and on account of the Andaman & Island administration.
31
Capex details
The company plans to incur a capex of US$ 1.6 bn over the next three years. About 15 vessels are estimated to be added in FY11 and another ~10 in FY12. The estimated capex details are as given below: Table: Capex details (Estimates)
Sr No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Newbuilding LR-II LR-II Aframax Aframax Aframax Aframax LR-1 LR-1 LR-1 LR-1 LR-1 LR-1 AHTSV AHTSV AHTSV Handymax Handymax Handymax Handymax Handymax Handymax AHTSV AHT AHT Panamax Panamax Panamax Panamax PSV PSV Type Product Product Crude Crude Crude Crude Product Product Product Product Product Product Offshore Offshore Offshore Drybulk Drybulk Drybulk Drybulk Drybulk Drybulk Offshore Offshore Offshore Drybulk Drybulk Drybulk Drybulk Offshore Offshore Shipyard Hyundai , S Korea Hyundai , S Korea Hyundai , S Korea Hyundai , S Korea Hyundai , S Korea Hyundai , S Korea STX S Korea STX S Korea STX S Korea STX S Korea STX S Korea STX S Korea Bharati Bharati Bharati STX Dalian STX Dalian STX Dalian STX Dalian STX Dalian STX Dalian Bharati Cochin Cochin STX Dalian STX Dalian STX Dalian STX Dalian Cochin Cochin 80655 80655 80655 80655 57000 57000 57000 57000 57000 57000 Total DWT 105000 105000 115000 115000 115000 115000 73000 73000 73000 73000 73000 73000 Year of addition (estimated) FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY11 FY 12 FY12 FY12 FY12 FY12 FY12 FY12 FY12 FY12 FY13 FY13 FY13 FY13 FY13 FY13
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Valuation
We believe that SCI will be able to draw upon the current low leverage and revitalize and grow its fleet in next two years. The container/liner segment may show a reduction in losses. We have valued SCI on EV/EBIDTA basis providing a multiple of 7.5x FY11E providing a target price of Rs 170. The book value of the fleet is ~Rs 150 for FY10. We believe that at the current market price the stock is fairly valued and recommend HOLD rating on the stock. Figure: Recent valuation surpassed the normal P/NAV band
250 200 150 100 50 0 Dec-03 Dec-05 Dec-07 Oct-02 Oct-04 Sep-03 Aug-05 Oct-06 Apr-02 Sep-07 Feb-07 Sep-09 Feb-03 Mar-04 Feb-05 Mar-06 Apr-08 Feb-09 Jun-09 May-03 May-05 May-07 Nov-08 Jan-10
.5XBV
Jul-02
Jul-04
Jul-06
Price
Source: IDBI Capital Market Services
1x NAV
0.5x NAV
Jul-08
.75x NAV
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Financials
Revenues
SCI is expected to book revenue CAGR of 15% over FY10-12E. Further growth in revenues is likely to be contributed by the fleet increment in the next couple of years which is likely to see addition of about 25 vessels. Of this the bulk(mainly tanker) segment is expected to provide major portion of growth with increment in the fleet. The recovery in the liner segment is currently dependent upon the ability of the liner companies to hold on to the rate. Figure: Revenues to show growth on back of fleet addition
50000 40000 (Rs mn) 30000 20000 10000 0 FY06 Liner Segment (Container)
Source: Company reports; IDBI Capital Market Services
FY07
FY08
FY09
FY10
FY11E
FY12E
EBIT to improve
We expect a modest recovery in liner segment and the accretion of the new-buildings is likely to lead to growth of overall EBIT. Figure: EBIT breakup: Liner segment recovery may support EBIT growth
12000 10000 8000 6000 4000 2000 0 -2000 -4000 FY06 FY07 FY08 FY09 FY10 Liner Segment(-)
Source: Company reports; IDBI Capital Market Services @ figures for bulk segment also include other income due to shipsale
(Rs mn)
FY12E Others
Interest cov er
34
Financial Summary
Profit & Loss Account
Year-end: March Net sales Growth (%) Operating expenses Operating profit Other operating income EBITDA Growth (%) Depreciation Other income EBIT Interest paid Non-recurring items Pre-tax profit (after non-recur.) Tax (current + deferred) Net profit (before Minority Interest, Pref. Dividend etc..) Prior period adjustments Minority interests Preference dividend Reported PAT Adjusted net profit Growth (%)
Source: Company reports; IDBI Capital Market Services
(Rs mn)
(Rs mn)
FY10 34,631 (17) (29,941) 4,690 0 4,690 -56.7 (3,801) 3,171 4,060 (525) 3,534 -56 4,760 (1,000) 3,760 0 0 0 3,760 2,534 (73)
FY11E 41,315 19 (31,428) 9,887 0 9,887 110.8 (5,366) 3,200 7,721 (1,146) 6,575 38 6,575 (131) 6,443 0 0 0 6,443 6,443 154
FY12E 46,030 11 (34,281) 11,749 0 11,749 18.8 (5,988) 3,300 9,061 (1,599) 7,462 13 7,462 (149) 7,312 0 0 0 7,312 7,312 13
FY09 10,798 2,867 2,835 (1,150) (4,313) 11,037 (15,174) (700) 2,461 (13,413) (2,377) 5,763 10,175 (3,220) (4,525) 8,193 5,816
FY10 4,760 525 (212) (1,000) 0 4,073 (4,862) (552) (1,100) (6,514) (2,441) 1,286 2,252 (2,469) (1,291) (222) (2,664)
FY11E 6,575 5,366 320 (131) 0 12,130 (29,482) 552 1,047 (27,884) (15,754) 1,969 22,489 (3,220) (3,223) 18,016 2,261
FY12E 7,462 5,988 106 (149) 0 13,406 (12,016) (1) 0 (12,017) 1,389 2,768 7,687 (3,220) (4,092) 3,143 4,532
Pre-tax profit (before non-recur.) 10,454 10,798 (1,150) 9,648 0 0 0 9,648 9,304
Key ratios
Year-end: March Adjusted EPS (Rs) Growth (%) Book NAV/share (Rs) Dividend/share (Rs) Dividend payout ratio (%) Tax (%) EBITDA margin (%) EBIT margin (%) ROCE (%) Net debt/Equity (%)
Source: Company reports; IDBI Capital Market Services
FY09 22.0 -72.8 146.6 6.5 34.6 10.6 26.0 26.6 14.1 -5.8
FY10 6.0 -72.8 149.7 5.0 97.4 21.0 13.5 11.7 4.6 0.3
FY11E 15.2 154.2 154.3 6.5 50.0 2.0 23.9 18.7 7.5 32.9
FY12E 17.3 13.5 160.8 6.5 44.0 2.0 25.5 19.7 7.5 36.2
Balance Sheet
Year-end: March Cash and Marketable securities Other current assets Investments Net fixed assets Total assets Current liabilities Total debt Total liabilities Share capital Reserves & surplus Shareholders' funds Minorities interests Total equity & liabilities Capital employed FY09 26,728 13,557 1,115 59,278 100,678 13,877 24,717 38,593 4,235 57,850 62,084 0 100,678 86,801 FY10 24,065 13,851 1,667 63,615 103,197 12,859 26,969 39,827 4,235 59,136 63,370 0 103,197 90,339 FY11E 26,326 13,177 1,115 87,731 128,349 13,552 49,458 63,010 4,235 61,105 65,339 0 128,349 114,797
(Rs mn)
FY12E 30,858 14,103 1,116 93,759 139,837 14,585 57,145 71,729 4,235 63,873 68,107 1 139,836 125,252
Valuations
Year-end: March PER (x) PCE (x) Price/Book (x) Yield (%) EV/Net sales (x) EV/EBITDA (x)
Source: Company reports; IDBI Capital Market Services
COMPANY REPORT
Analyst Chetan Kapoor +91-22-4322 1232
chetan.kapoor@idbicapital.com
HOLD
Summary
Mercator Lines (MLL), is India's second largest private sector shipping player has historically ridden the shipping cycles well to show rapid growth of 56% CAGR in revenues and earnings from FY04-09. The sudden sharp decline in charter rates in FY09 impacted the earnings adversely which in FY10 which led to 81% YoY fall in earnings. We expect the earnings scenario for the company to moderately improve from here. This is expected to be mainly due to aggressive expansion in other avenues like offshore (rigs), and coal to hedge its risks due to shipping. We believe that the stock is fairly valued at these levels and initiate coverage with a HOLD rating on the stock.
Investment Highlights
Most diversified player in the shipping space
Besides shipping, MLL has presence in offshore, coal mining, dredging and oil prospecting. The revenue contribution from all these segments on a consolidated basis is expected to be in excess of 35% for FY1112. We believe that the diversification strategy may help the company to withstand the downturn in the shipping space.
Key Stock Data Sector Shipping Bloomberg/Reuters MRLN IN / MRCT.BO Shares o/s (mn) 235.9 Market cap (Rs mn) 11,087 Market cap (US$ mn) 240 3-m daily average vol. 581,014 Price Performance 52-week high/low Rs 72/42
-1m -3m -12m Absolute (%) 0.6 (17.8) (20.8) Rel to Sensex (%) (7.3) (19.5) (44.7)
MLL is has reduced focus on the dredging segment which was bogged down by lower utilization post the ending of contracts with DCI for the Sethusamudram project and other manpower issues. It plans to develop the skillset of the people in place which would take 4-6 months, before undergoing further expansion.
Valuation
We have valued MLL on an SOTP basis which translates to Rs 52 on the consolidated entity. We have valued the shipping fleet on NAV basis and the rig business on EV/EBIDTA basis. The coal and the MOPU business have been valued on DCF basis. Table: Financial snapshot (Rs mn)
Year-end: March Net sales EBIDTA Adjusted net profit EPS (Rs) P/E (x) EV/EBIDTA (x) FY08 14,549 5,874 2,976 12.7 3.7 4.0 FY09 22,105 9,470 3,773 16.0 2.9 3.3 FY10 18,087 6,449 184 0.8 61.6 5.2 FY11E 24,352 6,614 711 2.9 16.2 5.3 FY12E 25,321 6,787 1,142 4.7 10.0 3.6
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Sensex
Mercator
Background
Mercator Lines Ltd (MLL) was incorporated on 24 November 1983 as a private limited company and is currently the second largest private sector shipping company in India. It was converted into a public limited company on 3 April 1984 and was taken over by the promoter of the company, Mr H. K. Mittal in 1988. After its maiden issue in 1993 the company procured an oil tanker of 1,000 dwt capacity and a cargo carrier of 4,300 dwt capacity and since then has grown manifold. The tonnage has expanded exponentially to about 1.8 mn dwt in 2007. The company has forayed into the oil & gas offshore business through its subsidiaries and placed an order for the construction of a new generation Jack-up rig. Currently, Mercator has presence in the segments of crude oil, product tanker and dry bulk operations. Mercator also has presence in coal mining through its subsidiary Oorja Holdings Pte, which holds coal mining blocks in Indonesia. Diagram: Company structure
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Time charters and COAs to provide good visibility for dry-bulk operations
Mercator Lines (Singapore) currently owns and operates 17 ships in dry-bulk space of which 13 vessels are owned. Currently, MLL has firm TCs for 8 of its vessels and COAs for another ~4 vessels which provides it a better TC:Spot mix of ~70:30. The company's strategy of fixing long term charters has helped it bode over worse of the times. Only one of these vessels is coming for re-negotiation in the next six months. Diagram: Mercator Dry Bulk Contracts Details: Indicate good coverage
Capex details
In FY11E MLL plans to incur a capex of US$ 125 mn on MOPU. Also capex in the tanker and the dry-bulk space is planned in FY11 though the exact amount and vessel acquisition target is not finalised. It also plans to incur further capex for prospecting of oil in the Gulf of Cambay blocks.
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Valuation
We have done a SOTP valuation of the stock where the shipping fleet has been valued on the basis of the NAV of the shipping fleet. We have provided a multiple of 0.9x to the shipping fleet NAV. The fleet asset price has been calculated on the basis of the database maintained taking the last traded price of the assets in the market. The rig business has been given a multiple of 5x EV/EBIDTA on global multiples enjoyed by the business. The Rig business has been Table: Valuation
Replacement cost of the shipping fleet (Rs mn) Current net debt (Rs mn) Multiple (x) Valuation of the shipping fleet (Rs mn) (A) Replacement cost of the dredging fleet Debt on the dredgers Multiple (x) Valuation of the dredging business (Rs mn) (B) EBIDTA of Rig business in FY11E (Rs mn) EBIDTA multiple (x) Valuation of rig business (Rs mn) (C) Total (Rs mn) (D) = (A+B+C) MOPU (DCF) (Rs mn) (E) Coal mining business value(DCF) (Rs mn) (F) Total valuation (Rs mn) (D+E+F) Total number of shares post dilution (mn) Value per share (Rs)
Source: Company reports; IDBI Capital Market Services
25,576 20,900 0.9 4,208 3,760 1,410 0.8 1,880 1,277 5 5,746 11,834 897 1,332 12,268 236 52
Figure: EV/EBIDTA
10 8 6 4 2 0 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10
1XBV .5XBV
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Financials
Revenues and EBIDTA
The revenue booking is expected to increase to Rs 24 bn by FY11E, 34.6% YoY growth on back of coal trading/mining segment which is expect to contribute almost 40% of total revenues. The share of the shipping revenues in the total revenues has been in the range of 70-80% in the last two years is expected to reduce further to ~50% by FY12E. Revenue contribution from the coal segment is expected to increase manifold mainly due to the trading activity undertaken by the company. Its impact on accretion of the profitability though is expected to be minimal (5-6% EBIDTA margin). Figure: Revenue growth: on back of coal trading
30000 25000 20000 (Rs mn) 15000 10000 5000 0 FY06 FY07 FY08E FY09E FY10E FY11E FY12E 8,262 42.1 26.3 11,228 14,549 22,105 40.4 42.8 80 70 60 50 40 30 20 10 0
35.7 18,087
(%)
27.2 24,352
26.8 25,321
Rev enues
Source: Company reports; IDBI Capital Market Services
EBITDA Margin
20% 0% FY11E Tankers Dry -bulk Dredging Offshore FY12E Others Coal
DSCR
Interest cov er
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Financial Summary
Profit & Loss Account
Year-end: March Net sales growth (%) Operating expenses Operating profit EBITDA growth (%) Depreciation Other income EBIT Interest paid Pre-tax profit (before non-recurring items) Non-recurring items Pre-tax profit (after non-recurring items) Tax (current + deferred) Net profit Adjusted net profit growth (%) Prior period adjustments Minority interests Net income
Source: Company reports; IDBI Capital Market Services
(Rs mn)
(Rs mn)
FY09 22,105 51.9 -12,636 9,470 9,470 61.2 -2,688 -362 6,420 -1,663 4,757 -5 4,752 -78 4,674 3,773 26.8 -383 -906 3,385
FY10 18,087 -18.2 -11,638 6,449 6,449 -31.9 -3,409 -238 2,802 -2,058 744 348 1,093 -50 1,042 184 -95.1 -510 532
FY11E 24,352 34.6 -17,738 6,614 6,614 2.6 -3,528 10 3,096 -1,628 1,468
FY12E 25,321 4.0 -18,533 6,787 6,787 2.6 -3,534 11 3,264 -1,517 1,747
FY09 4,752 2,412 10,667 -78 17,753 -27,985 -377 -28,362 -10,610 62 499 7,245 -139 2,956 10,623 14
FY10 1,093 2,049 -6,731 -149 -3,738 3,870 -326 3,544 -195 -314 2,804 -55 -1,905 530 335
FY11E 1,468 3,528 -7,740 -19 -2,763 -5,042 533 -4,509 -7,272 6 1,987 4,025 -55 3,454 9,416 2,144
Key ratios
Year-end: March EPS (Rs) (diluted) EPS growth (%) EBITDA margin (%) EBIT margin (%) ROCE (%) FY09 16.0 26.3 42.8 29.0 13.8 76.8 FY10 0.8 -95.2 35.7 15.5 5.1 90.7 FY11E 2.9 286.0 27.2 12.7 5.1 77.1 FY12E 4.7 60.7 26.8 12.9 4.7 34.3
Balance Sheet
Year-end: March Current assets Investments Net fixed assets Other non-current assets Total assets Current liabilities Total Debt Other non-current liabilities Total liabilities Share capital Reserves & surplus Less: Misc. expenditure Shareholders' funds Minorities interests Total equity & liabilities Capital employed
42
(Rs mn)
FY09 15,280 420 57,975 73,674 19,511 28,356 47,867 236 22,619 22,855 2,953 73,674 51,211
FY10P 13,924 746 52,056 98 66,824 11,090 31,160 42,250 236 21,190 21,426 3,149 66,824 52,586
FY11E 15,211 213 53,570 68,994 2,493 35,185 37,678 242 25,300 25,541 5,776 68,994 60,726
FY12E 23,825 213 50,080 74,118 2,558 32,801 35,359 242 32,165 32,406 6,353 74,118 65,207
Valuations
Year-end: March PER (x) PCE (x) Price/Book (x) Yield (%) EV/Net sales (x) EV/EBITDA (x)
Source: Company reports; IDBI Capital Market Services
COMPANY REPORT
Analyst Chetan Kapoor +91-22-4322 1232
chetan.kapoor@idbicapital.com
NOT RATED
Summary
Varun Shipping (VRNS) is a niche player in the LPG shipping space in India. It has a sizeable presence in the LPG shipping and offshore shipping with about 20 owned and operated vessels. The company is highly leveraged at the current stage and has reported difficulty in achieving contracts for its large size offshore vessels (160 tonnes). Also, the MGC-LPG vessel segment which traditionally offered more stable charter rates also suffered a drop in rates. The turnaround for the company which has been booking losses on an operational basis for the last six quarters will be largely dependent upon the turnaround in the offshore segment.
CMP
Rs 42
Key Stock Data Sector Shipping Bloomberg/Reuters VRNS IN / VRNS.BO Shares o/s (mn) 150 Market cap (Rs mn) 6300 Market cap (US$ mn) 136 3-m daily average vol. 71,142
Investment Highlights
Turnaround in higher end offshore category still elusive?
We believe that the turnaround in the higher end offshore category vessels has remained elusive for the company which the company had bought for about US$ 60 mn a piece. The higher end AHTSV category currently has an orderbook of 56% of existing fleet.
Valuations
We believe that the company earnings will continue to be under stress due to its inability to lock up long term charter on the higher end offshore vessels. The company trades at 14.7x FY10 EV/EBIDTA assuming a debt of Rs 30 bn.
Shareholding Pattern (%) Promoters FIIs/NRIs/OCBs/GDR MFs/Banks/FIs Non Promoter Corporate Public & Others
Stock vs Relative to Sensex
Price (Rs.)
140 120 100 80 60 40 20 0 Dec-09 Oct-09 Aug-09 Sep-09 Feb-10 Mar-10 Jun-09 Jan-10 Apr-10 Jul-09 Nov-09 May-10 Jun-10
(Rs mn)
FY10E 6,732 2,472 (2,179) N.A. 15.1
Sensex
Varun Shipping
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Background
Varun shipping is a key player in the LPG shipping business with one of the largest medium sized LPG carrier fleet (10 nos) in the world. Having a fleet strength of 20 vessels the company 72% of the revenues is contributed by the LPG carriers. Varun's has one of the best dividend paying track record in the industry and provided a dividend yield in excess of 6% over FY02-07. Diagram: Fleet details
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Financial Summary
Profit & Loss Account
Year-end: March Net sales Growth (%) Operating expenses Operating profit EBITDA Growth (%) Depreciation Other income EBIT Interest paid Pre-tax profit (before non-recurring items) Non-recurring items Pre-tax profit (after non-recurring items) Tax (current + deferred) Net profit Adjusted net profit Growth (%) Net income
Source: Company reports; IDBI Capital Market Services
(Rs mn)
FY06 6,429 65.3 (2,555) 3,874 3,874 129.6 (1,296) 13 2,591 (758) 1,833 1 1,834 (25) 1,809 1,808 115.2 1,809
FY07 6,726 4.6 (2,995) 3,731 3,731 (3.7) (1,657) 17 2,091 (1,111) 980 497 1,477 (63) 1,414 917 (49.3) 1,414
FY08 8,508 26.5 (3,577) 4,932 4,932 32.2 (2,119) 26 2,838 (1,396) 1,442 837 2,279 (21) 2,258 1,421 55.0 2,258
FY09 9,647 13.4 (4,409) 5,238 5,238 6.2 (2,805) 13 2,445 (1,455) 991 280 1,271 (43) 1,228 947 (33.3) 1,228
FY10 6,732 (30.2) (4,260) 2,472 2,472 (52.8) (2,365) 59 167 (1,932) (1,765) 2,304 539 (413) 126 (2,179) (329.9) 126
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Shipping Trends
Table: Asset Price Trends
US$ mn May 2010 (Avg.) NB 5 Year Crude VLCC Suezmax Aframax Panamax Product Bulk Carriers Capesize Panamax Supramax 58.0 33.0 32.0 60.5 40.0 31.0 1.8 (2.9) 0.0 0.0 3.2 0.8 5.5 (5.7) 6.7 6.1 5.3 9.0 5.5 (5.7) 6.7 22.2 21.2 21.1 (21.6) (10.8) (3.0) 24.7 36.8 24.0 105.0 63.5 53.5 45.4 34.2 90.0 62.5 41.3 35.3 22.5 0.0 0.8 0.0 (0.3) (0.4) 7.1 0.0 (1.8) (0.8) 0.2 200.0 111.7 (9.3) 0.4 6.8 136.8 119.7 8.6 8.5 1.2 7.7 1.6 4.9 (1.6) (2.3) 18.4 21.4 (6.3) (4.7) 1.2 (19.8) (18.6) (12.3) (17.7) (16.6) (1.6) 4.2 (7.3) (11.8) (31.7) Apr 2010 (1 month) NB 5 Year % change of current price from Feb. 2009 (3 month) Oct. 2009 (6 month) NB 5 Year NB 5 Year May 2009 (1 yr.) NB 5Year
% change in the current TCY/Index from Apr. 2010 Feb. 2009 Oct. 2009 (1 month) (3 month) (6 month) (23.2) 38.6 133.0 267.5 27.4 44.8 9.5 20.8 7.6 7.2 82.6 103.6 15.3 42.7 35.9 36.4 44.8 35.6 77.5 69.1 189.1 1,411.2 (3.1) (30.7) 10.0 40.3 46.9
May 2009 (1 Year) 528.8 183.4 319.1 157.7 58.8 35.7 91.8 85.3 86.1
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CY09 24.4 14.0 (23.2) 3.0 12.8 15.1 20.1 (363.3) 14.0 34.2 8.0 108.5 3.5 6.7 77.3 2.6 3.2 21.1 4.5 6.2 4.8 7.4 10.8 8.2 7.1 7.1 6.1 7.1 6.2 5.4 5.6 (0.5) 5.8
PE (x) CY10E 11.0 14.0 27.7 3.0 18.4 7.5 11.5 (61.9) 11.5 43.5 7.7 7.7 3.8 11.9 130.6 9.5 4.3 9.8 6.6 8.1 6.0 10.4 13.6 9.6 6.5 8.1 10.5 14.5 20.8 7.5 8.3 (0.2) 9.4
CY11E 11.1 (33.8) 19.1 12.3 9.4 7.2 11.5 655.8 11.1 30.8 7.9 6.4 6.4 14.6 180.4 11.9 4.2 11.3 5.9 8.1 6.3 9.1 7.9 12.5 6.1 7.9 10.6 8.9 9.4 10.3 (1.1) 9.4
CY09 10.9 10.5 11.9 9.2 8.6 11.3 16.6 11.2 10.9 7.2 6.1 6.1 5.5 10.8 20.8 3.5 5.2 6.6 4.2 4.1 3.2 4.1 7.8 4.6 5.6 4.2 6.7 6.0 5.8 4.2 8.4 6.0
EV/EBITDA (x) CY10E CY11E 8.5 10.5 9.0 10.2 9.4 6.6 10.2 14.9 9.4 6.4 5.6 5.6 5.4 8.7 31.1 5.5 6.1 6.0 5.2 4.6 3.8 5.4 9.2 4.9 5.0 5.0 8.0 8.1 6.8 5.5 7.6 7.6 8.3 9.8 8.6 30.3 8.2 6.3 7.2 10.2 8.3 4.7 5.7 6.8 6.4 7.8 28.7 5.9 5.4 6.6 4.9 4.6 3.9 4.8 5.6 5.6 4.5 4.8 8.0 6.3 5.2 6.3 4.7 6.3
CY09 3.6 0.9 0.9 0.6 1.3 2.9 0.9 0.4 1.0 0.2 0.6 0.4 1.8 0.4 3.9 0.5
P/B (x) CY10E 3.2 0.9 0.9 0.6 1.2 3.0 0.9 0.4 0.9 0.2 0.5 0.4 2.0 0.4 1.8 0.5
CY11 3.0 1.1 0.9 0.6 1.2 3.0 1.1 0.4 0.9 0.2 0.4 0.4 2.0 0.4 1.5 0.4
EV/EBIDTA (x) FY11E FY12E 6.2 7.3 5.3 5.2 6.2 3.6
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Notes
Key to Ratings Stocks: Buy: Absolute return of 15% and above; Accumulate: 5% to 15%; Hold: Upto 5%; Reduce: -5% to -15%; Sell: -15% and below. IDBI Capital Market Services Ltd. (A wholly owned subsidiary of IDBI Ltd.) Registered Office: 5th floor, Mafatlal Centre, Nariman Point, Mumbai 400 021. Phones: (91-22) 4322 1212 Fax: (91-22) 2285 0785 Email: info@idbicapital.com
Disclaimer This material is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other persons. Persons into whose possession this material may come are required to observe these restrictions. This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the solicitation of an offer to buy ant security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of the clients of IDBI Capital Market Services Limited (hereinafter referred to as IDBI Capital) and neither constitutes a personal recommendation nor does it take into account the particular investment objectives, financial situations or needs of individual clients. The information furnished in this material is on the basis of publicly available information, internal data and other reliable sources which are generally believed to be true and are for general guidance only. While every effort is made to ensure the accuracy and completeness of information contained in this material, neither IDBI Capital nor any of its employees take any responsibility and/or assumes any liability arising from the use of this material. Opinions expressed herein are our current opinion only as of the date appearing on this material. While we endeavor to update on a regular basis the information appearing in this material, there may be regulatory, compliance or other reasons which may prevent IDBI Capital or its affiliates from doing so. Clients and others in whose possession this material may come are cautioned that any forward- looking statements appearing in this material are not predictions and may be subject to change without notice. Our proprietary trading desks and investment businesses may make such investment decisions as may be inconsistent with the recommendations expressed herein. The recipients of this material should rely on their own investigations and take their own professional advice. The price and value of the investments referred to in this material may go up or down. Past performance is neither a guide/ indicator nor a guarantee for future performance. Certain transactions -including those involving futures, options and other derivatives as well as non-investment grade securities- involve substantial risk and may not be suitable for all investors. Reports and material based on technical analysis centers on studying the charts of a stock's price and trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report based on the company's fundamentals. IDBI Capital and its affiliates, officers, directors, employees and outsourced consultants (including the analyst who issued this material) may, on the date of this report and from time to time, (a) have long or short positions in, and buy or sell the securities of the companies mentioned in this material and/or (b) engage in any other transaction involving such securities and earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to the companies mentioned herein and/or inconsistent with any recommendation and related information and opinion expressed herein.
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