Buy ABG Shipyard; target of Rs 445: Justtrade.in

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Buy ABG Shipyard; target of Rs 445: Justtrade.in

Justtrade.in is bullish on ABG Shipyard and has recommended buy rating on the stock with a target of Rs 445 in its June 28, 2011 research report.

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Justtrade.in is bullish on ABG Shipyard and has recommended buy rating on the stock with a target of Rs 445 in its June 28, 2011 research report.

"ABG Shipyard Ltd., the flagship company of ABG group was incorporated in the year 1985 as Magdalla Shipyard Pvt. Ltd. with the main objects of carrying shipbuilding and ship repair business. The company since then has achieved the status of the largest private sector shipbuilding yard in India. ABG Shipyard products include tugs and pusher crafts, bulk carriers, floating cranes and jack-up drilling rigs. The company's shipyard has a lift capacity of 4,500 tons, side transfer facilities, concentrator (CNC) plasma cutting machine, bending rolls, hydraulic press, cold shearing machine, frame bending machine and steel processing machinery. During the fiscal year ended March 31, 2011 the company delivered 16 vessels. As of March 31, 2011, it delivered 138 vessels. During fiscal 2010, it bagged an order for the construction of three cement carriers of 20,000 deadweight tonnage."

"The western countries dominated the shipbuilding industry in the first three decades of the post- World War II era. However, high labour costs in the yards of Europe and USA, one of the major determinants in this competitive industry, led to a gradual shift of the center of shipbuilding to the Asian nations over the last two decades. Today shipbuilding has become an attractive industry for developing nations. Japan used shipbuilding in the 1950's and 1960's to rebuild its industrial structure, Korea made shipbuilding a strategic industry in the 1970's and China is now in the process to repeat these models with large state supported investments in this industry. The shift in shipbuilding activities, from Europe to Asia and the pick-up in the growth of Indian economy have opened up huge opportunities for Indian yards, and both public and private ship-builders are capitalizing on them."

"Shipping continues to remain unchallenged as the world's most efficient means of transportation. With a long coastline of about 7517 km, spread on the western and eastern shelves of the mainland, shipping forms an important natural resource for India's trade. In view of its importance, the Indian government has recognized the need to promote this industry including ports, harbours and new technologies to be developed in this emerging scenario. The Ministry of Shipping has finalized a National Maritime Development Programme (NMDP) to implement specific schemes for the development of this vital sector. The total investment involved for the projects identified under this programme for the period up to 2014-15 is Rs. 1,00,339 cr. Out of this, Rs. 55,804 cr is for the port sector and the balance is for shipping and inland water transport sectors. NMDP has envisaged setting up of 2 international standard shipyards in India, one on the west coast and the other on the east coast. For this, the government has nominated, Ennore Port and Mumbai Port Trust to function as nodal agencies. Expressions of interest received in this regard are being processed. Further, the government has established Indian Maritime University (IMU) in Chennai in the year 2008 with campuses at Chennai, Kolkata, Mumbai and Vishakhapatnam. It will promote advanced knowledge by providing research facilities in the emerging areas of marine science & technology, maritime environment and other related fields."

"ABG Shipyard has a market capitalization of Rs 1879.3 cr. and is trading at a share price of Rs. 369.05 The consolidated TTM EPS is Rs. 38.7 that has grown at a 5-year CAGR of 18.7%.This translates into a TTM PE of 9.6. The price to book value stands at 1.5. The 2-year average ROE stands at 21.7%. The stock is an attractive buy considering the growth prospects of the industry as well as the company. We recommend a "BUY" on the stock with an investment horizon of 12 months and target price of Rs. 445," says Justtrade.in research report.

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