X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 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.
G E Shipping: Margin expansion boosts profits - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

G E Shipping: Margin expansion boosts profits
Aug 12, 2013

G E Shipping has announced its June quarter results. The company has reported a 9% YoY drop in consolidated topline while the bottomline has registered a strong growth of 35% YoY

Performance summary
  • Consolidated topline comes in lower by 9% on a YoY basis
  • Operating margins expands by 10% on the back of significant fall in cost of hire of chartered ships
  • Strong operating performance supported by lower interest and benign depreciation charges leads to 35% YoY growth in net profits during the quarter
  • Standalone bottomline comes in higher by 43% YoY while the topline falls by 25% YoY
  • Consolidated profits for the full year grow 70% YoY on the back of a 2% growth in topline
  • The company has announced buy back of shares up to an aggregate amount of Rs 2.8 bn, being 5.53% of the total paid up capital plus free reserves at a price not exceeding Rs 279 per share.

  Consolidated Standalone
(Rs m) 1QFY13 1QFY14 Change 1QFY13 1QFY14 Change
Net sales 8,070 7,364 -8.7% 4,857 3,621 -25.4%
Expenditure 5,159 3,955 -23.3% 3,610 2,523 -30.1%
Operating profit (EBDITA) 2,911 3,410 17.1% 1,247 1,099 -11.9%
EBDITA margin (%) 36.1% 46.3%   25.7% 30.3%  
Other income 1,696 1,830 7.9% 1,521 1,861 22.4%
Interest (net) 1,190 915 -23.1% 740 541 -26.8%
Depreciation 1,535 1,589 3.5% 1,002 907 -9.5%
Profit before tax 1,882 2,736 45.4% 1,026 1,511 47.3%
Extraordinary items - 8   - 8  
Tax 72 294 310.6% 30 100  
Profit after tax/(loss)  1,810 2,450 35.4% 996 1,420 42.6%
Minority Interest - -   - -  
Net profit after minority interest 1,810 2,450 35.4% 996 1,420 42.6%
Net profit margin (%) 22.4% 33.3%   20.5% 39.2%  
No. of shares (m) 152.3 152.3   152.3 152.3  
Diluted earnings per share (Rs)*   39.5        
Price to earnings ratio (x)*   6.1        
(* on trailing twelve months earnings)

What has driven performance in 1QFY14?
  • While the shipping segment of the company saw its revenues fall by 14% YoY, there was a growth of 18% in the revenues for the offshore segment. Excluding other income however, topline fell 9% YoY.

    Segmental break up...
    Segment 1QFY13 1QFY14 Change
    Shipping
    Revenues 6,397 5,494 -14.1%
    PBIT 1,715 1,688 -1.5%
    PBIT margin 26.8% 30.7%  
    Offshore
    Revenues 3,435 4,061 18.2%
    PBIT 1,357 1,971 45.2%
    PBIT margin 39.5% 48.5%  

  • The company's revenue days were down 8% during the quarter for the shipping business. 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. Yields for product carriers however showed improvement and were up 37% YoY.

  • For the offshore business, revenue days were higher by 27% YoY.

  • As per the company, the revenues visibility for FY14 is around Rs 3.1 bn with dry bulk carriers covered to the extent of around 24% of the fleet's operating days. Crude tankers and product carriers (incl. gas) are 45% and 63% covered respectively.

    Cost break-up...
      Consolidated Standalone
    (Rs m) 1QFY13 1QFY14 Change 1QFY13 1QFY14 Change
    Employees cost 1,173 1,191 1.5% 479 496 3.6%
    % sales 14.5% 16.2%   9.9% 13.7%  
    Fuel, oil and water 1,237 975 -21.2% 1,120 933 -16.7%
    % sales 15.3% 13.2%   23.1% 25.8%  
    Hire of chartered ships/equipments 1,226 216 -82.4% 1,018 114 -88.8%
    % sales 15.2% 2.9%   21.0% 3.1%  
    Consumption of stores and spares 361 365 1.2% 248 204 -17.6%
    % sales 4.5% 5.0%   5.1% 5.6%  
    Repairs and maintenance 295 365 23.6% 259 225 -13.0%
    % sales 3.7% 5.0%   5.3% 6.2%  
    Others 867 843 -2.8% 487 551 13.1%
    % sales 10.7% 11.4%   10.0% 15.2%  

  • On account of a 10.2% expansion in operating margins, operating profits were up 17% on a YoY basis. The expansion was led by fall in cost of hire of chartered ships/equipments that fell by nearly 12% as a percentage of sales.

  • A jump in other income as also a 23% fall in interest charges has resulted in the company growing by a strong 45% YoY at the PBT level on a consolidated basis. Despite a 311% jump in tax charges, the bottomline grew at an impressive rate of 35% YoY.
What to expect?
At the current price of Rs 245, the stock trades at a multiple of around 0.6x its FY15 standalone book value per share. As per the company, while trade is likely to remain robust going forward, a wave of new supply of vessels is likely to put pressure on freight rates. Strong revenue visibility on the offshore side however is a comforting factor as per us. We recommended investors to Hold on to the stock in May 2013 and we stick with the target price of Rs 350 per share from an FY16 perspective as mentioned in the report.

We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also, within your overall exposure to equities please ensure that you broadly follow our suggested asset allocation and that no single stock comprises more than 5% of your portfolio.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

G.E.SHIPPING SHARE PRICE


Sep 19, 2018 (Close)

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 G.E.SHIPPING WITH

MARKET STATS