Accumulate GE Shipping - Result Update - Motilal Oswal

Great Eastern Shipping (GESCO IN; Mkt Cap USD938 mn, CMP Rs. 274, Accumulate)

GE Shipping results were above estimates adjusted for the Rs. 85 cr of write-off on sale of ordered ships.

Revenues degrew by 23% on account of lower shipping freight rates and lower ships. The offshore business has shown a growth of 3% to Rs. 234 cr on account of higher number of assets deployed.

Operating margins have declined from 33% to 25% on Rs. 85 cr of one-time write off. GE Shipping has sold 3 VLCC Dry bulk carriers that were on order at lower than cost. Adjusted for the one-time cost, margins would have been higher at 39%.

With profits above our conservative estimates, we have rasied our estimates marginally but still remain far below concensus. We currently lack visibility on the shipping business to project FY13 estimates and will introduce the same in due course.

Compelling valuations and good management credentials , coupled with growth likely in the offshore segment form the basis of our Accumulate rating on the stock.

Investors desirous of quick returns could, however, stay away for now as this stock could test one's patience.

Source : Equity Bulls

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