ABG Shipyard’s (ABG’s) topline for the quarter stood at Rs3,368.6 million, indicating a growth of 40% y-o-y.
However, the topline declined by 29.3% q-o-q. This was largely on account of slower-than-expected order execution by the company. Subsidy booking for the quarter stood at Rs340 million.
EBITDA margins also declined to 19.7% as against 22.7% in Q4FY08 as the company has started utilising its steel stock that had been accumulated at higher prices.
ABG has been accounting for the difference between raw material cost as assumed on the date of book closure and actual raw material cost under the financial expenses head as against under the raw material head. This has been corrected in the current quarter.
Although ABG’s debt increased from Rs12 billion in Q3FY09 to Rs15 billion in Q4FY09, the overall finance charge declined from Rs513 million in Q3FY09 to Rs302 million in Q4FY09.
Besides a change in the accounting policy, LC and bank guarantee charges were lower in the quarter.
The company also converted certain working capital loans to commercial paper, thereby leading to a decrease in the average borrowing cost. ABG’s net profits increased by 12.8% y-o-y and q-o-q on account of this saving.
The stock currently trades at a PER of 8.9x FY10 and 6.3x FY11 (ex-subsidy). We expect the company’s profits (ex-subsidy) to grow at 16.2% CAGR over the next two years. We maintain our ACCUMULATE rating on the stock.