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G E Shipping: Other income spoils the show - Views on News from Equitymaster
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G E Shipping: Other income spoils the show
Aug 14, 2014

G E Shipping has announced its June quarter results. The company has reported a 10% YoY growth in consolidated topline while the bottomline has fallen 9% YoY. Here is our analysis of the results

Performance summary
  • Consolidated topline grows by 9% on a YoY basis
  • Operating margins slip marginally on the back of jump in fuel costs
  • Fall in other income earned by 47% leads to a 9% fall in profits on a YoY basis
  • Standalone bottomline falls 38% YoY on the back of a 6% growth in topline

  Consolidated Standalone
(Rs m) 1QFY14 1QFY15 Change 1QFY14 1QFY15 Change
Net sales 7,364 8,082 9.7% 3,621 3,851 6.3%
Expenditure 3,955 4,375 10.6% 2,523 2,756 9.2%
Operating profit (EBDITA) 3,410 3,707 8.7% 1,099 1,095 -0.3%
EBDITA margin (%) 46.3% 45.9%   30.3% 28.4%  
Other income 1,830 979 -46.5% 1,861 1,089 -41.4%
Interest (net) 915 754 -17.7% 541 471 -12.9%
Depreciation 1,580 1,470 -7.0% 898 771 -14.2%
Profit before tax 2,744 2,462 -10.3% 1,520 942 -38.0%
Extraordinary items - 44   - 44  
Tax 294 277   100 110 10.0%
Profit after tax/(loss)  2,450 2,229 -9.0% 1,420 876 -38.3%
Minority Interest - -   - -  
Net profit after minority interest 2,450 2,229 -9.0% 1,420 876 -38.3%
Net profit margin (%) 33.3% 27.6%   39.2% 22.8%  
No. of shares (m) 152.3 150.8   152.3 150.8  
Diluted earnings per share (Rs)*   36.6        
Price to earnings ratio (x)*   9.9        
(* on trailing twelve months earnings)

What has driven performance in 1QFY15?
  • It is the offshore business again that came to the company's rescue during the quarter as segmental revenues were seen higher by 7% YoY during the quarter. Shipping business on the other hand continued to suffer from pressure on freight rates amidst excess supply in the market and hence witnessed an 8% YoY fall in the same period. The fact that there was 88% fall in profits earned from foreign currency transactions also did not help matters. The poor performance of the shipping business can also be seen in the steep 37% fall in segmental EBIT as opposed to same quarter last year.

    Segmental break up...
    Segment 1QFY14 1QFY15 Change
    Shipping
    Revenues 5,494 5,059 -7.9%
    PBIT 1,688 1,058 -37.3%
    PBIT margin 30.7% 20.9%  
    Offshore
    Revenues 4,061 4,351 7.1%
    PBIT 1,971 2,201 11.7%
    PBIT margin 48.5% 50.6%  

  • As far as operating margins are concerned, they came in lower by 0.4% during the quarter, mainly on account of a 22% jump in cost of fuel, oil and water.

  • Profitability was significantly impacted by the 47% fall in other income, leading to a 9% fall in net profits on a consolidated basis during the quarter.
What to expect?
At the current price of Rs 360, the stock trades at a trailing twelve month earnings of close to 10 times on a consolidated basis. We are in the process of reviewing our assumptions to arrive at the FY17 estimates for the stock.

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