Result Update: Great Offshore; Bharati Shipyard; Motherson Sumi Systems

Great Offshore

Reco: ACCUMULATE

CMP: Rs406

Target Price: Rs506

Earnings Disappoints- valuations remain compelling

·      GOL's Q1FY11 APAT at Rs267 mn (-35.2% yoy) – below estimates led by lower revenue (Rs2.35bn down 4.5% yoy) – dry docking of 3 high yield vessels impacted revenues

·      Minimal revenue accretion from high yield vessels lead to 765 bps decline in offshore services margins to 38%. Steep jump in Marine E&C margins restricts EBIDTA decline to just 1.8%

·      Cut FY11 EPS by 8.2% to Rs59.4. Introduce FY12 EPS at Rs73.4. Remain bullish on GOL- revenues from high yield vessels & Rig Amarnath to drive earnings from Q3FY11

·      Valuation at 5.5X FY12E earnings ~ 35% discount to Aban offshore, remain compelling - Maintain ACCUMULATE- target of Rs506

 

 

Bharati Shipyard

Reco: REDUCE

CMP: Rs236

Target Price: Rs196

No respite, Retain 'Reduce'

·      Disappointing Q1FY11 performance with 38% yoy decline in net profits to Rs221 mn – due to lower revenue booking (up 9% yoy to Rs3.3 bn) and high interest costs (up 127% yoy)

·      Unexecuted order book declined sequentially for the 7th quarter by 15% qoq to Rs19.2 bn. Lowest order book cover at 1.5X revenues

·      Maintain negative bias on core shipbuilding business. Downside risks to our earning estimates continue to exist

·      Downgrade SOTP price target to Rs196 (from Rs235) consequent to 8% downgrade in earning estimates of Great Offshore. Retain REDUCE

 

 

Motherson Sumi Systems

Reco: BUY

CMP: Rs176

Target Price: Rs205

Above expectation, raise TP to Rs205

·      Results above expectation driven by better than expected topline. Tax rate @ 40% in the due to higher deferred tax post FCCB conversion

·      Adverse currency movement affects 1QFY11 performance. Currency risks are largely translational as it has arrangement with OEMs for the currency swings, Impact visible with a lag

·      Demand outlook remains strong across geographies and across segments. Expect model launch activity to pick up

·      Upgrade FY11 EPS by 5.3% to Rs9.9 and FY12 EPS by 11% to Rs13.5. Upgrade TP to Rs205 (from Rs185). Maintain BUY rating

 

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