As part of our PL Mega Corporate Month event, we recently hosted investor meetings with ABG Shipyard (ABG).
ABG has not witnessed any order book accretion in the last one year. However, the positive is that there have also been no order cancellations from their existing order book of Rs116 billion (unexecuted portion is Rs90 billion).
This is despite the large number of cancellations faced by the Chinese and Korean shipyards.
Of the entire book, the only order which is a cancellation suspect is one from Scan Shipping Norway amounting to Rs1 billion.
The orders for cargo vessels amount to 43% of the total order book, while OSV’s and rigs amount to 40% and 17%, respectively. The company’s order book is executable up to 2013-14.
ABG’s planned capex at Dahej amounts to Rs16.5 billion, of which Rs4.5 billion has been allocated towards the shipyard, while the remaining Rs12 billion is towards the rig yard.
The company has already spent a total of Rs10.5 billion, while the balance will be spent in FY10.
The company is also installing the largest shiplift facility in the world at its Dahej rig yard. This will enable the company to build vessels of the largest dimensions.
ABG is in its last stage of acquiring Western India Shipyard. The scheme is still in the court, but is likely to get resolved shortly.
Western India Shipyard clocked in revenues of Rs750m in the current year as against the highest revenues of Rs600m reported in its history. It also made marginal profits in FY09. Till date, ABG has spent Rs150m towards up-gradation of the yard.
Based on PER excluding subsidy, ABG is currently trading at 6x FY10 and 4.3x FY11. The PER with subsidy is 4x FY10 and 3.4x FY11. We continue to maintain ACCUMULATE rating on the stock.