>ABG SHIPYARD (ICICI DIRECT)

■ ABG locks in an extraordinary profit of ~ Rs 53 crore...
ABG Shipyard (ABG) exited its stake in Great Offshore Ltd (GOL) by offloading its 8.27% stake in GOL at an average price of Rs 576 per share. ABG had picked up its stake in GOL at various intervals and the average cost of acquisition was Rs 403 per share. By liquidating its stake in GOL, ABG made an extraordinary profit of Rs 53.2 crore, which would result in an increase in its EPS from Rs 34.5 to Rs 41.3 for FY10.

Short-term gain but an opportunity lost…

■ ...but loses golden opportunity to acquire GOL
Although ABG has made a significant profit from this transaction, it has also lost the opportunity to acquire GOL. The acquisition of GOL would have propelled ABG into a higher growth trajectory with a significant ramp up in revenues and de-risking of its business model.

Exiting the race would allow its nearest competitor Bharati Shipyard Ltd (BSL) to race ahead and gain significant size. Keeping in context the present valuation of ABG, we recommend an ADD rating on the stock with a revised price target of Rs 227.

To read the full report: ABG SHIPYARD