CRISIL assigns fundamental grade 2/5 to Dolphin Offshore

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CRISIL assigns fundamental grade 2/5 to Dolphin Offshore

CRISIL Research has come out with its report on Dolphin Offshore Enterprises. The research firm has maintained the fundamental grade of 2/5 to the company in its December 12, 2011 report.

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CRISIL Research has come out with its report on Dolphin Offshore Enterprises . The research firm has maintained the fundamental grade of 2/5 to the company in its December 12, 2011 report.

Dolphin Offshore Ltd's (Dolphin's) Q2FY12 consolidated revenues underperformed CRISIL Research's expectations. While operations were expectedly subdued on account of monsoons, revenues were also lower since the company's vessel Seamec 1 was inactive for the quarter. While operating profitability was better than expected, consolidated PAT was impacted by higher interest cost and poor performance of the company's Mauritian subsidiary. This pulled down Dolphin's bottom line, which was in the red. While we expect revenues to pick up post Q3FY12 and be supported by chartering of the newly delivered construction barge Vikrant Dolphin, we lower our FY12 revenue estimates in light of subdued H1 performance. We have broadly retained our FY12 PAT estimate since we believe that despite better operating profitability, higher interest cost will pressurise PAT in H2FY12. We largely maintain our estimates for FY13. Given the continued bleak visibility on the EPC order book, we retain our fundamental grade of 2/5.

Q2FY12 result analysis:

• Dolphin's Q2FY12 standalone revenues declined by 29.5% y-o-y to Rs 343 mn from Rs 692 mn as the company's EPC business remained subdued and Seamec 1 was inactive for the entire quarter (estimated revenue loss of Rs 270 mn). On a consolidated basis, revenues declined 14.7% y-o-y.
• Standalone EBITDA margin was 20.3%, and was stable q-o-q. In Q2FY11, claim recovery had led to abnormally high EBITDA margin of 48.2%.
• The company reported a standalone PAT of Rs 14 mn against Rs 178 mn in Q2FY11. At the consolidated level, Dolphin's subsidiary Dolphin Offshore Enterprises (Mauritius) Private Ltd, made losses in Q2FY12 due to lower charter rates and higher fixed costs. The company therefore made a loss on a consolidated basis. MS Devine (one of the three vessels operated by the subsidiary) was chartered at low rates of $4700/day and Beas Dolphin, another of their vessels, underwent modifications during the quarter, resulting in higher operating costs. With additional chartering revenues from new barge Vikrant Dolphin, we expect the subsidiary's performance to improve in the subsequent quarters. 

Valuation: Current market price has strong upside We continue to use price-to-book value multiple approach to value Dolphin. We maintain our fair value estimate at Rs 122 per share. At the current market price of Rs 80, the valuation grade is 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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