Hold Pipavav Defence; target of Rs 64: ICICIdirect

ICICIdirect.com has recommended to hold Pipavav Defence & Offshore with a target price of Rs 64, in its research report dated June 15, 2015.

August 03, 2015 / 19:02 IST

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ICICIdirect.com's report on Pipavav Defence & Offshore

Pipavav Defence & Offshore Engineering’s (PDOECL) revenues declined 88% YoY to Rs 50.4 crore on account of lower execution and working capital constraints. During the quarter, there was no trading income while shipbuilding segment also declined significantly

Owing to a significant decline in revenues, the company reported a loss of Rs 131.4 crore at the EBITDA level compared to a profit of Rs 140 crore during Q4FY14

Interest expenses, which were already at elevated levels, increased further by 22% YoY to Rs 138 crore leading the company to report a loss of Rs 236 crore at the PAT level

"FY15 has been a tough year for PDOECL with a decline in revenues and EBITDA generation resulting in a loss at the PAT level. We expect FY16, FY17 to see an improved revenue performance. However, profitability at the net level remains a concern. PDOECL’s long term prospects depend on its ability to get defence shipbuilding orders, which would provide its revenues better visibility. With Reliance Infra at the helm, we believe PDOECL is better placed than before to capture the humongous opportunity presented by the indigenisation of Indian defence procurement. We value PDOECL at 2.7x FY17 P/BV to arrive at a target price of Rs 64 with a HOLD recommendation on the stock", says ICICIdirect.com research report.