>GREAT EASTERN SHIPPING (ICICI DIRECT)

Fleet expansion to drive growth…
Great Eastern Shipping (GE) reported better-than-expected results with an 8.6% QoQ growth in topline, which came in at Rs 766.7 crore. Firm freight rates in the crude (up 39%) and dry bulk segment (up 13%) has enabled GE to report higher revenues despite marginally lower revenue days and a decline of 7% in freight rate for product carriers. GE’s performance stands out as compared to other shipping companies. The company has managed to deliver an admirable performance despite a volatile freight rate environment. GE is also ramping up its fleet (especially in offshore segment), which will be scaled up to 27 vessels in FY12 from the present 17 vessels. Total fleet size will increase to 74 vessels in FY12 from the present 53 vessels. In FY12, GE would be operating at peak capacity and the full impact of the same would be visible in the financials. We maintain our STRONG BUY rating on GE.

■ Performance improves on the back of firm rates GE’s performance in Q4FY10 improved as its consolidated revenue increased by 8.6% to Rs 766.7 crore on the back of firmness in freight rates for crude and dry bulk carriers. Revenue days in Q4FY10 were marginally lower at 3,374 days compared to 3,402 days in Q3FY10. In spite of lower revenue days, higher TCE per day for dry bulk carriers as well as crude carriers, which increased to Rs 23,963 and Rs 29,322 as compared to Rs 20,964 and Rs 17,778, respectively, in Q3FY10, enabled GE to register an improvement in its revenue and profitability.

Valuation
Factoring in FY12E earnings, GE is trading at a significant discount to its fair value and the stock is likely to get re-rated. We have valued GE on multiple valuation parameters to arrive at price target of Rs 387. We are maintaining our STRONG BUY rating on the stock.

To read the full report: GE SHIPPING