Hold Garware Offshore; target Rs 210: Emkay

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Hold Garware Offshore; target Rs 210: Emkay

Emkay Global Financial Services has recommended a hold rating on Garware Offshore, with price target of Rs 210, in its report dated February 3, 2010.

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Emkay Global Financial Services has recommended a hold rating on Garware Offshore , with price target of Rs 210, in its report dated February 3, 2010. The stock closed at Rs 185.80 on February 8, 2010.

"Garware Offshore Limited Q3FY2010 numbers are below estimates on account of higher than expected employee cost and other expenditure. Consolidated revenue for quarter at Rs 638 million grew 23.8% on account of vessel addition. Sequentially also revenue grew by 17.9% on account of full quarter of operation of two vessels in the subsidiary. EBIDTA at Rs 264.8 million was lower than our estimates of Rs 320.5 million on account of higher than expected employee and other expenditure. EBIDTA margins declined 283 bps for the quarter to 41.5%. Depreciation charge increased 59.9% yoy resulting in net profit decline of 16.5% yoy to Rs 86.3 million (our estimate of Rs 150 million). To factor in the lower than operating performance for the quarter and the sale of PSV Everest, we are downgrading our earnings estimates of GOSL by 27.8% for FY2010 (EPS of Rs21.7) and 21.1% for FY2011 (EPS of Rs 27.5). At current levels, the stock looks fairly valued at PER of 7.8x and P/B of 1.5x on FY2011E numbers. We downgrade our rating on the stock from BUY to HOLD with a target of Rs 210," says Emkay Global Financial Services report.

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To read the full report click on the attachment