Buy Shipping Corporation; target of Rs 75: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com's report on Shipping Corporation of IndiaSCI’s Q1FY16 revenues de-grew 1.2% YoY, (up 1.4% QoQ) to Rs 1056.5 crore (I-direct estimate: Rs 1035 crore). Continued softness in the liner segment led to de-growth of 36% YoY to Rs 165.5 crore. This was offset by growth in bulk segment, up 9% YoY to Rs 805.9 crore.Technical & offshore segment revenues remained at ~Rs 84 crore EBITDA for the quarter witnessed tailwinds from lower bunker costs, which stood at 17% as percentage of sales compared to 36% in Q1FY15 and 19% in Q4FY15. EBITDA was at Rs 325.8 crore compared to Rs 178 crore in Q1FY15 and Rs 283 crore in Q4FY15. SCI reported its best ever EBITDA margins since FY10 at 30.8%. Rationalisation of expenses like cargo handling and repairs/maintenance also contributed to the EBITDA growth PAT growth was further accelerated due to a decline in depreciation and interest costs by ~25% each. The company posted its second consecutive quarter of profit at Rs 164 crore compared to Rs 101.5 crore in Q4FY15 and Rs 49.5 crore in Q1FY15. The positive performance was primarily on the back of operational efficiencies.On the valuation perspective, SCI’s five year average price/book value multiple has been 0.7x. The stock had traded at an average PBV multiple of ~0.9x during April 2008-March 2011. During this period, the company was making profits at the net level and had a dividend payout of ~40%, which enabled it to trade at reasonable valuations in line with peers. However, with losses in FY12, FY13 and FY14, and absence of dividend payment, its average PBV valuation in the last two years has come down to ~0.3x.Though the company has been able to report profits in FY15, majority of the same came from higher other income and profit in sale of ships. Further, lower depreciation due to rescinding of vessels by shipyards and consequent increase in other income (penalty paid by shipyards and refund of payments) aided PAT. With the positive swing from bunker costs and rationalisation of other expenses, we expect margins to increase to ~25%. Thus, we expect PAT to grow at 43% CAGR over FY15-17. Consequently, we value SCI at 0.45x FY17E book value with a target price of Rs 70 and have a HOLD recommendation on the stock, says ICICIdirect Services research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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