Rev pressure in tanker segment: Karvy Stock Broking

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Rev pressure in tanker segment: Karvy Stock Broking

Vikram Suryavanshi of Karvy Stock Broking has a view there is some pressure in tanker segment in terms of a revenue and margin, which in turn impacted to GE Shipping and SCI.

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ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets GE Shipping BSE | NSE 29/05/12 Are Mutual Funds betting on GE Shipping? Other Stocks in this news Mercator | Shreyas Shipping |

Vikram Suryavanshi of Karvy Stock Broking has a view there is some pressure in tanker segment in terms of a revenue and margin, which in turn impacted to GE Shipping and SCI.        

Excerpts from the exclusive interview with Vikram Suryavanshi:

Q: What stocks are you bullish on with those dry bulk rates remaining so firm at this point of time and the VLCC rates not quite? How do you see the industry panning out for the next 12 to 18 months?

A:  Predominantly Indian shipping companies have exposure on tankers as well as dry bulk and dry bulk index, which used to be in the range of 4,000 to 6,000 is now trading at around 10,500 that is a 150% YoY jump. So the dry bulk segment is expected to give very good results in terms of margin and revenue for shipping companies. If you look at the relative exposure, Mercator Lines would be the biggest beneficiary of this development and to some extent GE Shipping and Shipping Corporation but freight rates in tanker segment are quite low. Average rates for VLCC and Suezmax, which used to carry crude used to be in the range of USD 45,000 to 50,000 per day.

Now the rates for these same vessels are around USD 10,000 per day. So there is some pressure in tanker segment in terms of a revenue and margin. So that is again impacted to GE Shipping and SCI.        

Q: In that case, what are your best buys and what are the price targets you have set on companies like Shreyas Shipping and Mercator ?

A: Apart from this fundamental development, a significant re-rating in the shipping stocks has happened; even though there is not much net improvement in core earnings, the PE rating has been significantly hyphened. Stocks are now trading at almost 10 times, which used to be trading around 4 to 5 times. So there is second thing into it in terms of valuations or target price.

So Mercator stock price has run up considering to the fundamental development so we still see some weakness in stock price of Mercator Lines. if you look at Shreyas Shipping, the play is mainly in logistics as well as container shipping and we see lot of improvement happening in container side. So we are positive on Shreyas Shipping in terms of looking at the development in container as well as its exposure on logistics side and acquisition in freight forwarding. It is trading at 10 times, so we see quite a significant upside from Shreyas Shipping and GE Shipping from current levels.