Accumulate ABG Shipyard; target of Rs 396: P Lilladher

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Accumulate ABG Shipyard; target of Rs 396: P Lilladher

Prabhudas Lilladher is bullish on ABG Shipyard and has recommended accumulate rating on the stock with a target of Rs 396 in its February 9, 2011 research report.

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Prabhudas Lilladher is bullish on ABG Shipyard and has recommended accumulate rating on the stock with a target of Rs 396 in its February 9, 2011 research report.

"ABG Shipyard reported revenues to the tune of Rs 4.8 billion, a growth of 12.7% YoY; however, down 13% QoQ. Margins were subdued at 16.9% v/s 26% in Q2FY11. The company booked subsidy to the tune of Rs 580 million during the quarter. Adjusted PAT grew 12% YoY to Rs 535 million; however, down 16% QoQ. ABG reported margins at 16.7% this quarter compared to 18.7% in Q2FY10 and 26% in Q2FY11. The fall in margins is attributable to income booked on low value stages this quarter. However, we expect the margins to normalize to a level of 23%, going forward. The company executed work on two pollution control ships, OSVs, and conversion of an Anchor Handler to a Diving support vessel. Revenues booked on the rig as milestones were not achieved during the quarter."

"ABG received subsidy disbursements to the tune of Rs 150 million during the quarter, while it has received Rs 1.5 billion worth of subsidy till date. Besides, the company booked subsidy to the tune of Rs 580 million this quarter. The orderbook of the company stands at Rs 137 billion, while the unexecuted orderbook stood at Rs 103 billion. No new orders were received during the quarter, however, the management is extremely confident of getting a large quantum of orders. At CMP of Rs 343, the stock trades at PER of 6.2x FY12 PAT, including subsidy and 8.2x FY12, considering PAT without subsidy. We are basing our target price at 7x FY12E PAT which translates to Rs 396. We upgrade the stock to 'Accumulate'," says Prabhudas Lilladher research report.

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To read the full report click on the attachment