>Great Offshore(Citi)

Buy: 2Q Affected by One-offs; New Target Price Rs403
Disappointing 2Q, marred by one-off low utilisation — 2Q standalone PAT of Rs169m (-66% yoy, -74% qoq) was well below estimates, driven primarily by 4 vessels (2 PSVs, 1 MSV, and the construction barge) not functioning at all during the quarter due to a combination of technical downtime, operational difficulties and surveys, combined with expenses related to repairs and dry docking of these vessels. The 3 OSVs have since been pressed back into service and will contribute to 3Q earnings, while the construction barge is likely to be operational by Dec. We view the 2Q performance as one-off and estimate
~Rs0.35-0.40bn of incremental revenues in 3Q .

Increasing revenue forecasts but lowering earnings — We have reduced our FY09-11E reported earnings by 12-15%, despite revenue and EBITDA estimates increasing by 2-10% and -1% to 7% respectively. While our revenue/EBITDA forecasts have risen due to a combination of (i) acquisition of the new AHTSV in Aug (US$47K day rate) and (ii) incorporation of new rupee forecasts, our earnings estimates have been decreased primarily to factor in higher funding cost (+200 bps) given tight credit conditions and higher debt to
finance the new vessel acquisition.

Maintain Buy on stable business profile, good earnings visibility — We maintain our Buy/Medium Risk rating on the stock with a revised TP of Rs403. Despite the earnings cuts and lower TP, we remain positive on the company at current valuations given a relatively stable business profile (nearly 75% of revenues are from ONGC) and good earnings visibility (avg. contract durations are 2-2.5 yrs) which make it less exposed to a cyclical downturn in the offshore capex cycle.

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