Hold Shipping Corp; target of Rs 57: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com`s research report on Shipping Corporation of India“Shipping Corporation of India’s (SCI) Q1FY15 revenue grew ~12% YoY to Rs 1068.9 crore vs. Rs 959 crore in Q1FY14. The performance was led by the bulk segment, which posted healthy revenue growth of 15% YoY to Rs 727.2 crore followed by flattish growth in the liner segment (1% YoY) to Rs 251.01 crore. However, the offshore segment de-grew 12% YoY to Rs 81.3 crore in Q1FY15. EBITDA for the quarter recorded growth of 41% YoY to Rs 178.4 crore. The growth in EBITDA was on account of an expansion in EBITDA margin by 349 bps YoY to 16.7% due to operational efficiencies. PAT of the company turned positive at Rs 49.5 crore in Q1FY15 against a loss of Rs 98.7 crore in Q1FY14. The company was able to post a second consecutive quarter of profit due to higher income on account of rescinding of ships from shipyards together with profit from sale of ships to the tune of Rs 22.4 crore.” “SCI is the largest shipping company of India and currently operates a fleet of 72 vessels with a total capacity of 5.8 million dwt. Over the last four years, the company has incurred a capex of ~ Rs 7000 crore to acquire new vessels to replace its ageing fleet. The fleet expansion has hurt the company’s profitability as new vessels have joined the fleet when the rates are at low levels due to overcapacity in the industry. Consequently, the company has seen lower operating margins over the last four years. In FY11, SCI had an EBITDA margin of ~ 23%, which touched a low of ~1% in FY12. Though FY13 and FY14 have seen a gradual improvement in EBITDA margin to 9.3% and 14.2%, respectively, higher depreciation and interest cost have negatively impacted earnings at the net profit level. Depreciation & interest cost has gone up from Rs 465 crore and Rs 64.4 crore in FY11 to Rs 856 crore and Rs 208 crore in FY14, respectively. This has led to a loss for the last three years against a profit of Rs 567 crore in FY11. However, with SCI rescinding some ordered vessels, it gets a breather in the form of higher other income (penalty & refund from shipyards), thereby leading to an improvement in net profit for SCI.” “Though the liner segment remains under pressure, an improvement in the bulk category brought relief to SCI. Further, higher other income was due to cancellation of ordered vessels by shipyards in the form of penalty and refund aid tapering down losses (also lowering depreciation). Going ahead, we expect the company to be able to improve its operational performance due to better control on operating expenses and a marginal improvement in freight rates. Consequently, we continue to value SCI at 0.4x FY16E book value with a target price of Rs 57,” says ICICIdirect.com research report.    

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