'Hold' ABG Shipyard, target Rs 373: KR Choksey

KR Choksey has recommended a `Hold` on ABG Shipyard with a price target of Rs 373 as against the market price (CMP) of Rs 333 in its report dated Feb. 6, 2010. ``ABG Shipyard reported revenue growth of 0.8% y-o-y and 22.7% q-o-q to Rs 492.8 crore. The revenue was driven by high subsidy income of Rs 650 million booked in this quarter, as compared to Rs 290 million and Rs 237 million booked in Q3FY09 and Q2FY10, respectively, as the company executed higher amount of export orders in this quarter. The company`s order been stagnant for the past four quarters and stands at 122 billion. The unexecuted portion of the order book is Rs 84 billion, providing revenue visibility for the next 4-5 years.
For Q3FY10, the company`s EBITDA increased 85.6% y-o-y and 32.4% q-o-q to Rs 1,443 million, driven mainly by higher subsidy income. Consequently, operating margin improved sharply to 29.3% as compared to 15.9% and 27.2% in Q3FY09 and Q2FY10, respectively. Interest cost increased to Rs 381 million as compared to Rs 89 million in the corresponding quarter last year, mainly on account of increase in the debt. Further, the earnings were boosted by one-time gain of Rs 344 million on account of the sale of investments made in Great Offshore. Excluding the exceptional, the net profit increased 4.0% y-o-y and 4.4% q-o-q to Rs 479 million.
At currently, the stock is trading at the CMP of Rs 333 per share. We have arrived at a fair value of Rs 373 for ABG based on P/E, EV/EBITDA and P/B multiples. We thus recommend a Hold to the company`s stock,`` the broking house said.