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CRISIL maintains fair value of Rs 371 to ABG Shipyard

Published on Thu, Mar 01, 2012 at 14:20 | Source : Moneycontrol.com

Updated at Thu, Mar 01, 2012 at 14:25

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ABG Shipyard

BSE | NSE 31/05/12

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CRISIL Research has come out with its report on ABG Shipyard . The research firm has maintained the fundamental grade of 3/5 to the company in its February 28, 2012 report.

ABG Shipyard Ltd's (ABG's) Q3FY12 revenues were in line with CRISIL Research's expectations. Revenues increased ~15% y-o-y to Rs 6,193 mn due to faster order book execution and rupee depreciation. EBITDA margin declined by ~120 bps y-o-y to 24.6% due to lower subsidy income booked in the quarter. PAT declined ~13% y-o-y to Rs 465 mn due to increase in capital cost. We maintain the fundamental grade of 3/5.

Q3FY12 result analysis (Standalone)
� Revenues grew 14.6% y-o-y and 6.5% q-o-q to Rs 6,193 mn due to faster order book execution and rupee depreciation as exports contributed nearly 70% of Q3 revenues.

� EBITDA margin declined by ~121 bps y-o-y, but increased ~75 bps q-o-q to 24.6% primarily due to lower subsidy income booked in the quarter. Subsidy income booked was only ~Rs 86 mn, which was below our expectations. One-time settlement of Rs 253 mn with one of the customers also impacted margins.

� Depreciation expense increased ~47% y-o-y to Rs 256 mn due to partial capitalisation of shiplifting facility construction at the Dahej yard. Interest expense increased ~18% q-o-q and ~28% y-o-y to Rs 514 mn because of increase in debt and finance charges. The company maintains huge amount of cash (Rs 6,809 mn as on September 30, 2011) which it intends to utilise for acquisitions/investments, resulting in high debt.

� ABG booked an additional tax liability of ~Rs 57 mn related to the previous year in Q3FY12, which also impacted its profitability.

� PAT margin declined by ~239 bps y-o-y to 7.5% in line with the decline in EBITDA margin, higher capital cost and increased tax expense. PAT declined ~13% y-o-y to Rs 465 mn.

Earnings estimates - revised downwards
We maintain our revenue and EBITDA estimates for FY12 and FY13. We have reduced our PAT estimate by 13.3% for FY12 and 4.3% for FY13 to Rs 2,011 mn and Rs 1,764 mn, respectively. The decline is due to increase in interest cost because of rising debt levels. Earlier, we had not factored in any usage of excess cash and had assumed that it would be brought down to repay debt.

Valuation: Current market price is aligned
We continue to use the discounted cash flow method to value ABG and maintain the fair value of Rs 371 per share.

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.