X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GE Shipping: Tougher times ahead - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 5, 2002

    GE Shipping: Tougher times ahead

    The downturn in the global economy and its consequent effect on world trade is clearly reflected in The Great Eastern Shipping Company's first quarter results for FY03. While revenues have declined by as much as 36%, there has been a marked fall in net profit as well in the same period. In contrast with last two fiscal years, FY03 is going to be a challenging year for shipping majors.

    (Rs m) 1QFY02 1QFY03 Change
    Net sales 3,381 2,160 -36.1%
    Other Income 44 56 28.0%
    Expenditure 2,016 1,380 -31.6%
    Operating Profit (EBDIT) 1,365 781 -42.8%
    Operating Profit Margin (%) 40.4% 36.1%  
    Interest 144 94 -34.7%
    Depreciation 485 458 -5.7%
    Profit before Tax 779 285 -63.4%
    Extraordinary items -42 97  
    Tax 103 87 -15.4%
    Profit after Tax/(Loss) 634 295 -53.4%
    Net profit margin (%) 18.8% 13.7%  
    No. of Shares (m) 215.9 190.3  
    Diluted Earnings per share* 13.3 6.2  
    P/E Ratio (x)   4.5  
    (*annualised)      

    As mentioned earlier, one of the key reasons for the decline in revenues during 1QFY03 is primarily on account of slowdown in world economy and reduction in crude output by the Organisation of Petroleum Exporting Countries (OPEC). International oil demand has been lacklustre over the last year or so in line with weakness exhibited by the industrial sector worldwide. While it is known that the US economy has a bigger impact on freight rates, there has not been enough support from Europe and Japan to even partially compensate for the lull in US GDP growth in recent quarters. Consequently, the company's freight and demurrage income are lower by 56% in 1QFY03. But on the other hand, the company's charter income (primarily contracts entered into for transportation of dry bulk, crude and petroleum products over a certain time frame) was lower only marginally. However, as we go forward, we also expect charter income to come under pressure, thus dragging down revenues further.

    On first glance, it may look that revenues are lower by 36%. However, since the shipping industry is cyclical in nature, the results have to be viewed with the slowdown in mind. First quarter of FY02 was a bumper year for shipping companies like GE as is evident from the table below. While the US economy started to show signs of weakness in 1QFY02 itself, GE Shipping shifted its focus from spot to charter markets to capitalise on high freight rates and lower its exposure in spot trades. As a result, the company posted a 46% rise in revenues in the corresponding quarter previous year. So the recent quarter performance requires a comparison with historical first quarter average revenues to gauge a trend. Since 1QFY00 was the time when freight rates were close to its 52-week low levels, comparatively, GE Shipping has performed well in the current fiscal. Besides, in 1QFY02, revenues from projects amounted to Rs 213 m, which is nil in 1QFY03. Excluding this adjustment, income has actually declined by 31%.

    In comparison...
    (Rs m) 1QFY00 1QFY01 1QFY02 1QFY03
    Revenues 2,027 2,313 3,381 2,160
    % YoY change   14.1% 46.2% -36.1%

    The spurt in other income is primarily on account of higher interest income from free cash flow generated in FY02 to the tune of Rs 1.5 bn (other income here excludes gain on sale of ships). Interest expenses are lower on account of repayment of debts to the tune of Rs 1.7 bn in FY02. Operating margins have come under significant pressure due to lower capacity utilisation and higher expenses incurred for repairs and maintanence, especially towards new ships acquired. Extraordinary items include gain on sale of ships and assets (the company sold one bulk carrier and a tanker in 1QFY03).

    GE Shipping bought back 12 m shares during the quarter as a result of which paid-up capital stands reduced to Rs 1,903 m. On the reduced paid-up capital, the stock currently trades at Rs 28 implying a P/E multiple of 4.5x annualised 1QFY03 earnings. While the company expects tanker and dry bulk rates to stabilise towards the later half of the fiscal, the continuing flow of fresh tonnage in the market could keep freight rates subdued and consequently revenues.

     

     

    Equitymaster requests your view! Post a comment on "GE Shipping: Tougher times ahead". Click here!

      
     

    More Views on News

    G E Shipping: Feeling Pressure From the Offshore Segment (Quarterly Results Update - Detailed)

    Aug 18, 2017

    GE Shipping reported a subdued performance on the back weak offshore segment.

    G E Shipping: A Bad Quarter (Quarterly Results Update - Detailed)

    May 9, 2017

    GE shipping registered a loss in 4QFY17 due to weak global shipping market and lower crude prices which negatively impacted the offshore segment.

    G E Shipping: Crude, Product, and Offshore Segment Drag Performance (Quarterly Results Update - Detailed)

    Feb 16, 2017

    G E Shipping has reported a 22.8% YoY decline in the topline while the bottomline has declined by 33.4% YoY.

    Cochin Shipyard Limited (IPO)

    Aug 1, 2017

    Should you subscribe to the IPO of Cochin Shipyard Ltd?

    G E Shipping: Pressure from All Segments Drags Performance (Quarterly Results Update - Detailed)

    Nov 21, 2016

    G E Shipping has reported a 20.2% YoY decline in the topline while the bottomline has declined by 24% YoY.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    G.E.SHIPPING SHARE PRICE


    Aug 21, 2017 12:19 PM

    TRACK G.E.SHIPPING

    • Track your investment in G.E.SHIPPING with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    G.E.SHIPPING - ABG SHIPYARD COMPARISON

    Compare Company With Charts

    COMPARE G.E.SHIPPING WITH

    MARKET STATS