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G E Shipping: Good performance overall - Views on News from Equitymaster
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G E Shipping: Good performance overall
Aug 18, 2015

G E Shippinghas announced its June quarter results. The company has reported 17% YoY growth in consolidated topline while the bottomline has grown 45% YoY. Here is our analysis of the results.

Performance summary
  • Consolidated topline grows by 17% on a YoY basis
  • Operating margins expand significantly, leading operating profits to jump 36% YoY
  • Benign depreciation and interest charges have further boosted profitability, causing bottomline to go up by 45% YoY
  • Standalone bottomline grows 85% YoY on the back of a 20% growth in topline

  Consolidated Standalone
(Rs m) 1QFY15 1QFY16 Change 1QFY15 1QFY16 Change
Net sales 8,082 9,465 17.1% 3,851 4,613 19.8%
Expenditure 4,375 4,421 1.1% 2,756 2,534 -8.0%
Operating profit (EBDITA) 3,707 5,044 36.1% 1,095 2,078 89.8%
EBDITA margin (%) 45.9% 53.3%   28.4% 45.1%  
Other income 979 803 -17.9% 1,089 802 -26.4%
Interest (net) 754 699 -7.3% 471 442 -6.1%
Depreciation 1,470 1,614 9.8% 771 766 -0.6%
Profit before tax 2,462 3,535 43.6% 942 1,672 77.4%
Extraordinary items 44 -   44 -  
Tax 277 298   110 50 -54.5%
Profit after tax/(loss)  2,229 3,237 45.2% 876 1,622 85.1%
Minority Interest - -   - -  
Net profit after minority interest 2,229 3,237 45.2% 876 1,622 85.1%
Net profit margin (%) 27.6% 34.2%   22.8% 35.2%  
No. of shares (m) 150.8 150.8   150.8 150.8  
Diluted earnings per share (Rs)*   59.6        
Price to earnings ratio (x)*    6.6        
(* on trailing twelve months earnings)

What has driven performance in 1QFY16?
  • The 17% growth in consolidated topline was driven both by shipping as well as the offshore business as these segments grew by 11% and 14% respectively during the quarter.

  • In the shipping business, the key driver for the revenues was the jump in time charter yields for crude carriers as well as product carriers as these came higher by 97% and 44% YoY respectively. The 42% drop in yields for the dry bulk segment however led to some negative impact on the revenues. The total revenue days on the other hand remained more or less at the same level as last year.

  • As for the offshore division, while revenue days were higher by 6%, the remaining growth seems to have come from improvement in rates.

    Segmental break up...
    Segment 1QFY15 1QFY16 Change
    Shipping
    Revenues 5,059 5,634 11.4%
    PBIT 1,058 1,858 75.5%
    PBIT margin 20.9% 33.0%  
    Offshore
    Revenues 4,351 4,974 14.3%
    PBIT 2,201 2,376 7.9%
    PBIT margin 50.6% 47.8%  

  • On the operating margin front, fall in crude prices seem to have come to company's aid as sharp drop in fuel prices played a major role in operating margin expanding by 7.4% over previous quarter. Lower repairs and maintenance costs and other expenses also helped boost margins to some extent.

  • While the company's other income fell, benign depreciation and interest charges gave further impetus to profitability, leading to 45% growth in bottomline on a YoY basis.
What to expect?

At the current price of Rs 402, the stock trades at a trailing twelve month earnings of close to 7 times on a consolidated basis. The stock has run up a bit after we closed the position at Rs 350 per share. Some of the excitement has perhaps to do with the good first quarter results. We are working on updating our view on the stock which we will come out with shortly.

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