S t r o n g o p e r a t i n g p e r f o r m a n c e …
Pipavav Defence and Offshore Engineering Company (PDOECL) declared
impressive results for Q2FY12. Revenues increased by 33% on a QoQ
basis to | 449.8 crore while EBITDA increased by 52% to | 101 crore on
the back of a 280 bps improvement in the EBITDA margin. Net profit
growth (18%) has been subdued due to higher interest and depreciation
charges. During the quarter, the company’s second goliath crane became
operational. Hence, higher interest (up by 45%) and depreciation (up by
63%) have been accounted for. With the second goliath crane becoming
operational, PDOECL will be able to speed up the execution, which would
provide an up-tick to its revenues.
ƒ Enhanced long-term revenue visibility
Pipavav Defence and Offshore Engineering Co (PDOECL) has recently
seen quite a lot of positive news flows that augur well for the company.
Firstly, Pipavav had received an order to the tune of | 2900 crore from the
Indian navy for building five naval gunboats/NOPVS, which was a first as
it was the first time that a private sector company was awarded the
contract for warship building with the Indian Navy. Secondly, Pipavav’s
JV with MDL places it in a very unique position as no other private sector
company has accomplished such a landmark achievement. The joint
venture would be a win-win situation for both PDOECL and MDL. Media
reports indicate that MDL has a pending order book to the tune of |
1,00,000 crore, which at the current pace of execution could take at least
15 years to be completed. Pipavav would gain from strong revenue
visibility as it would get a ready order book to execute and utilise its yard
and fabrication capacity to the fullest. The JV would significantly enhance
the scale of operations for Pipavav as annual execution from the MDL
order book could be of a much higher magnitude compared to its current
level of operations.
V a l u a t i o n
PDOECL is trading at 2.7x FY13E BV of | 30.3. We believe that Pipavav
certainly deserves a scarcity premium considering its strong revenue
visibility compared to its global peers and value the stock at 3x FY13E
book value with a target price of | 91.
Pipavav Defence and Offshore Engineering Company (PDOECL) declared
impressive results for Q2FY12. Revenues increased by 33% on a QoQ
basis to | 449.8 crore while EBITDA increased by 52% to | 101 crore on
the back of a 280 bps improvement in the EBITDA margin. Net profit
growth (18%) has been subdued due to higher interest and depreciation
charges. During the quarter, the company’s second goliath crane became
operational. Hence, higher interest (up by 45%) and depreciation (up by
63%) have been accounted for. With the second goliath crane becoming
operational, PDOECL will be able to speed up the execution, which would
provide an up-tick to its revenues.
ƒ Enhanced long-term revenue visibility
Pipavav Defence and Offshore Engineering Co (PDOECL) has recently
seen quite a lot of positive news flows that augur well for the company.
Firstly, Pipavav had received an order to the tune of | 2900 crore from the
Indian navy for building five naval gunboats/NOPVS, which was a first as
it was the first time that a private sector company was awarded the
contract for warship building with the Indian Navy. Secondly, Pipavav’s
JV with MDL places it in a very unique position as no other private sector
company has accomplished such a landmark achievement. The joint
venture would be a win-win situation for both PDOECL and MDL. Media
reports indicate that MDL has a pending order book to the tune of |
1,00,000 crore, which at the current pace of execution could take at least
15 years to be completed. Pipavav would gain from strong revenue
visibility as it would get a ready order book to execute and utilise its yard
and fabrication capacity to the fullest. The JV would significantly enhance
the scale of operations for Pipavav as annual execution from the MDL
order book could be of a much higher magnitude compared to its current
level of operations.
V a l u a t i o n
PDOECL is trading at 2.7x FY13E BV of | 30.3. We believe that Pipavav
certainly deserves a scarcity premium considering its strong revenue
visibility compared to its global peers and value the stock at 3x FY13E
book value with a target price of | 91.
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