>ESSAR SHIPPING (ICICI DIRECT)

Essar Shipping Ports & Logistics Ltd (ESPLL) reported an encouraging performance and ended FY10 with 16% revenue growth and 23% PAT growth. The year was eventful for the company as revenue from its new divisions i.e. port/terminals and oilfield services started to make a significant contribution to the topline. During Q4FY10, ESPLL also commissioned its 30 MTPA
bulk terminal at Hazira. This is a captive port to serve the requirements of Essar Steel with which ESPLL has signed a 20 year contract and would be handling iron ore pellets, coal, limestone and finished steel products.

■ Encouraging performance in Q4FY10
ESPLL reported a 6.5% topline growth in Q4FY10 at Rs 852.6 crore as against Rs 800.6 crore in Q3FY10. Revenue growth mainly came on account of an 8.9% rise in the ocean transport business at Rs 412.7 crore and a 28.1% rise in the surface transport business at Rs 225.5 crore. The port and terminal business reported a stable performance with Rs 113.0 crore revenues while the oilfield services business registered a drop of 24.0% at Rs 101.4 crore. The company posted a PAT of Rs 64.5 crores in Q4FY10.

Valuation
Contrary to other shipping companies, which have seen a drop in topline in FY10 due to weakness in freight rates, ESPLL reported a 16.6% topline growth in FY10 mainly aided by the rise in revenues from the oilfield services business, surface transport business and port & terminal business. This more than compensated for the drop in the ocean transport business. Going forward, we expect the company to perform well as new port capacity gets commissioned and its shipping and offshore fleet gets ramped up with delivery of 12 dry bulk carriers and two jack-up rigs. We have valued each of the divisions of ESPLL on DCF basis and arrived at our SOTP price target of Rs 93 and maintain our BUY rating on the stock.

To read the full report: ESSAR SHIPPING