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G E Shipping: Consol. profits up more than 2-fold - Views on News from Equitymaster

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G E Shipping: Consol. profits up more than 2-fold
Feb 9, 2013

G E Shipping has announced its December quarter results. The company has reported flat consolidated topline while the bottomline has registered a strong growth of 119% YoY. Here is our analysis of the results.

Performance summary
  • Consolidated topline comes in flat on a YoY basis
  • Operating margins expand by 8.3% on the back of savings on most of the cost heads
  • Strong operating performance and gains on the forex front help the company post 119% YoY growth in consolidated bottomline during the quarter
  • Standalone bottomline comes in higher by 162% YoY while the topline grows by 11% during the quarter
  • Consolidated profits for the nine month period grow 62% YoY on the back of a 5% growth in topline

  Consolidated Standalone Consolidated
(Rs m) 3QFY12 3QFY13 Change 3QFY12 3QFY13 Change 9mFY12 9mFY13 Change
Net sales 7,562 7,591 0.4% 4,178 4,655 11.4% 21,292 22,314 4.8%
Expenditure 5,003 4,394 -12.2% 3,090 3,227 4.4% 13,661 13,560 -0.7%
Operating profit (EBDITA) 2,559 3,196 24.9% 1,088 1,429 31.3% 7,631 8,754 14.7%
EBDITA margin (%) 33.8% 42.1%   26.0% 30.7%   35.8% 39.2%  
Other income 803 1,219 51.9% 708 820 15.8% 2,809 3,195 13.7%
Interest (net) 1,144 856 -25.2% 739 531 -28.1% 3,252 2,617 -19.5%
Depreciation 1,434 1,510 5.4% 980 956 -2.4% 4,054 4,428 9.2%
Profit before tax 784 2,049 161.5% 77 761 884.9% 3,133 4,904 56.5%
Extraordinary items 210     210 -   210 -  
Tax 107 131 21.7% - 10   532 364 -31.6%
Profit after tax/(loss)  886 1,918 116.5% 287 751 161.7% 2,811 4,540 61.5%
Minority Interest 12 -   - -   37 -  
Net profit after minority interest 875 1,918 119.3% 287 751 161.7% 2,774 4,540 63.7%
Net profit margin (%) 11.7% 25.3%   6.9% 16.1%   13.2% 20.3%  
No. of shares (m) 152.3 152.3   152.3 152.3   152.3 152.3  
Diluted earnings per share (Rs)*               32.4  
Price to earnings ratio (x)*               7.7  
(* on trailing twelve months earnings)

What has driven performance in 3QFY13?
  • While the shipping segment of the company grew by 10% YoY, there was a marginal drop of 2% in the revenues for the offshore segment. Excluding other income however, topline remained almost flat.

  • The company's revenue days were up by 5% during the quarter. However, there was a significant fall in time charter yields in both the crude carriers and the dry bulk segment and this affected its topline growth

  • As per the company, the revenues visibility for the balance part of FY13 is around Rs 1.8 bn with dry bulk carriers covered to the extent of around 57% to the fleet's operating days. Crude tankers and product carriers (incl. gas) are 84% and 76% covered respectively.

    Cost break-up...
      Consolidated Standalone Consolidated
    (Rs m) 3QFY12 3QFY13 Change 3QFY12 3QFY13 Change 9mFY12 9mFY13 Change
    Employees cost 1,189 1,050 -11.7% 500 502 0.3% 3,397 3,300 -2.8%
    % sales 15.7% 13.8%   12.0% 10.8%   16.0% 14.8%  
    Fuel, oil and water 1,043 1,254 20.1% 933 1,200 28.7% 3,002 3,483 16.0%
    % sales 13.8% 16.5%   22.3% 25.8%   14.1% 15.6%  
    Hire of chartered ships/equipments 951 682 -28.3% 556 576 3.7% 2,625 2,405 -8.4%
    % sales 12.6% 9.0%   13.3% 12.4%   12.3% 10.8%  
    Consumption of stores and spares 414 412 -0.5% 260 268 3.3% 1,177 1,184 0.6%
    % sales 5.5% 5.4%   6.2% 5.8%   5.5% 5.3%  
    Repairs and maintenance 455 235 -48.5% 377 155 -58.9% 910 904 -0.6%
    % sales 6.0% 3.1%   9.0% 3.3%   4.3% 4.0%  
    Others 951 763 -19.7% 465 525 13.0% 2,550 2,284 -10.4%
    % sales 12.6% 10.1%   11.1% 11.3%   12.0% 10.2%  

  • On account of an 8.3% expansion in operating margins, operating profits were up to the tune of 25% on a YoY basis. Except for fuel, oil and water charges, all the other cost heads came down as a percentage of sales.

  • A 52% jump in other income as also a 25% fall in interest charges has resulted in the company growing by a strong 162% YoY at the PBT level on a consolidated basis. A 22% jump in tax charges meant that the bottomline grew at a slightly lower yet an impressive rate of 119% YoY.

What to expect?
At the current price of Rs 248, the stock trades at a multiple of around 0.6x its FY15 standalone book value per share. The stock is mostly an asset play and given the company's long standing track record in expertly navigating the highly cyclical shipping industry, we continue to maintain our HOLD view on it.

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