Buy Great Offshore; target of Rs 259: ICICIdirect.com

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Buy Great Offshore; target of Rs 259: ICICIdirect.com

ICICIdirect.com is bullish on Great Offshore and has recommended buy rating on the stock with a target of Rs 259 in its May 16, 2011 research report.

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RELATED NEWS Hold Hero Honda Motors; target of Rs 1998: KRChoksey Accumulate Unichem Labs; target of Rs 215: Emkay Buy Jaiprakash Associates; target of Rs 96: Emkay ALSO READ See previous views by ICICIdirect.com See what other Experts & Brokerages are saying about Great Offshore See messages about Great Offshore Great Offshore BSE | NSE 31/05/12 Are Mutual Funds betting on Great Offshore?

ICICIdirect.com is bullish on Great Offshore and has recommended buy rating on the stock with a target of Rs 259 in its May 16, 2011 research report.

"Great Offshore reported disappointing Q4FY11 results with contraction in EBITDA margin from 38.6% to 34.6% on QoQ basis despite a 9.4% QoQ rise in topline. Lower utilisation levels (78%) along with weakness in charter rates for offshore support vessels were the main factors leading to the decline in EBITDA margin for the company. We expect the topline as well as the bottomline to remain flat on account of drop in utilisation levels along with pressure on charter rates. In addition the company has also sold one of its drilling rigs Amarnath in Q1FY12 which would lead to further pressure on topline. However as the company has secured long term charter contracts for two of its jack up rigs Badrinath and Kedarnath, the decline would be arrested to a large extent resulting in modest performance going ahead."

"Great Offshore reported 9.4% QoQ rise in topline at Rs 216.3 crore in Q4FY11. The main factor contributing to the rise in topline was deployment of its drilling rig Kedarnath on long term charter contract with ONGC. However, the company's EBITDA declined marginally to Rs 74.9 crore along with contraction in EBITDA margin to 34.6% in Q4FY11. Interest costs rose by 30.9% on QoQ basis, resulting in the company posting net operating loss of Rs 8.1 crore. However the company booked extraordinary profit of Rs 55.8 crore as it changed its policy with regards to accounting for inventory resulting in the company posting a net profit of Rs 47.7 crore."

"At the CMP of Rs 231, the stock is trading at 6.8x FY13E EPS of Rs 34.1 and 0.58x FY13E book value of Rs 398.9. We have valued Great Offshore at 0.65x FY13E book value to arrive at price target of Rs 259 and recommend a BUY rating on the stock with a target price of Rs 259. Existing investors should also continue to HOLD the stock," says ICICIdirect.com research report.

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To read the full report click on the attachment