Shreyas Shipping & Logistics: Making waves

Sachin Pal Moneycontrol Research

Shreyas Shipping & Logistics, the largest provider of coastal container shipping services in India, reported a strong set of numbers in the last quarter of FY18. The company reported its highest ever quarterly sales and profit in the last 12 quarters. It has also witnessed a big turnaround in the past one year and this positive trend will continue into the future as well.

Strong quarterly and full-year performance

Sales for the quarter gone by increased 65 percent year-on-year to Rs 158 crore. Earnings before interest, tax, depreciation and amortisatioin (EBITDA) came in 106 percent higher than last year at Rs 30 crore. The company registered a profit after tax of Rs 23 crore compared to a loss of Rs 13 crore in the corresponding quarter of last year.

FY18 performance was also strong as the company reported a topline growth of 46 percent. Improvement in operational margin resulted in EBITDA increasing to Rs 110 crore in FY18 from Rs 51 crore in FY17. Revenue share for domestic cargo in FY18 stood at 55 percent while the balance came from its export-import cargo business.

Undisputed leader in domestic containerised cargo trade

SSL, part of the global logistics conglomerate Transworld Group, has a fleet of 13 vessels and serves 18 main ports in India. It also covers the entire coastline and other regional areas.

During FY18, it handled a total volume of 448,200 TEUs (20-foot equivalent units) as against 331,000 TEUs last year, a growth of 35 percent YoY. Revenue and margins came in better than expectations as the Howe Robinson Container Index (HRCI), which indicates charter rates (ship rentals) for container ships, moved up to 746 in March 2018 from 612 in April 2017. Amid strong demand, the index has further moved higher to 790-800 levels during April and May.

The company enjoys a market share of over 50 percent in the domestic containerised cargo trade business and 90 percent share in EXIM transhipment.

Outlook and recommendation

Indian ports and coastal regions are set to witness significant development thanks to the ambitious Sagarmala project mooted by the Centre. Through the Sagarmala project, the government plans to upgrade existing ports with world class facilities and also develop new ports to facilitate trade.

The company expects to achieve 20 percent YoY growth in tonnage both for container as well as break bulk. It plans to provide services to newer markets and routes and also strengthen its break bulk business using multi-purpose vessels.

The management has recently signed a Memorandum of Agreement for acquisition of one container vessel having a capacity of about 2,500 TEUs. The vessel, which is expected to be delivered in Q2 FY18, will take the SSL’s total fleet to 14 vessels and aid volume and revenue growth in the coming year.

With a market price of Rs 450 per share, the stock is currently trading at nearly 10 times FY19 price-to-earnings multiple and offers a fairly attractive investment proposition in the ongoing market correction.

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