ABG Shipyard..cmp...255...Value Buy.....

*FIRST CHOICE - Local shipbuilders to benefit from proposed cargo norms...



 In a move that will likely give domestic shipbuilders a shot in the arm, the Indian government plans to give first preference to ships built and registered in India for moving cargo imported by do- mestic entities such as Oil and Natural Gas Corp. Ltd, Indian Oil Corp. Ltd and Bharat Petro- leum Corp. Ltd.


Currently, only Indian- flagged vessels, or ships that are registered locally and bear the Indian tricolour, have the right of refusal to match the lowest rate quoted by a foreign flagship for cargo transporta- tion. This is in accordance with the rules set by regulator Di- rectorate General of Shipping, or DGS. All Indian-flagged ves- sels are not necessarily Indian- made vessels.


“It is proposed in the draft action plan, that to promote Indian shipbuilding sector, we may give the first right of refus- al to Indian-built, Indian- flagged vessels and second right of refusal may be given to the other Indian-flagged ves- sels,“ R.K. Sen, assistant direc- tor in the shipbuilding and re- pair division of the ministry of shipping, wrote in a recent circular inviting comments from DGS.


This could be done by modi- fying existing guidelines issued by DGS, Sen wrote. Mint has reviewed the circular.


Besides cargo import op- portunities, the country's coastal trade is reserved for In- dian-registered ships and for- eign ships are hired to operate in Indian territorial waters only when Indian ships are not available and that too with the regulator's approval.

If indeed this proposal comes into force, leading pri- vate shipyards such as ABG Shipyard Ltd, Bharati Shipyard Ltd, Larsen and Toubro Ship- building Ltd and Pipavav Ship- yard Ltd will stand to benefit, given their shipbuilding capa- bility.


India has 27 shipyards, in- cluding state-run entities such as Cochin Shipyard Ltd, Hindu- stan Shipyard Ltd and Hooghly Dock and Port Engineers Ltd.


ABG Shipyard, India's largest private shipbuilder, has an order book of Rs12,100 crore and its closest rival Bharati Shipyard's order book is to the tune of Rs4,987 crore.


S.S. Kulkarni, secretary gen- eral of the Indian National Shipowners' Association, an industry lobby, said DGS had sought its comments on the proposal made by the ministry of shipping, but declined to comment on it as he is still col- lating the opinions of member firms.


A senior executive from a leading shipping company said the Indian shipbuilding indus- try isn't mature enough to meet demand.


“Indian shipyards are still not up to the standards of in- ternational shipyards and could not cater to the require- ments of Indian demand,“ said the executive, who didn't want to be named. “It will take at least 10-15 years for Indian ship makers to reach global standards. Moreover, there could be conflict of interest as most ship makers have their own shipping companies.“


According to him, compa- nies such as Shipping Corp. of India Ltd (SCI) and Great East- ern Shipping Co. Ltd have huge fleet acquisition plans to meet cargo demand.


Indian shipping companies largely rely on South Korean and Japanese ship makers al- though they have in recent years started placing orders with domestic shipyards.


 “Any move to help indige- nous efforts are welcome,“ said S.S. Hajara, chairman and managing director at SCI, “Also, I do not see any difficul- ty in fleet acquisition for SCI because of this new proposal as we purchase ships through a global tender. It is quite appropriate to give support to Indian shipbuilders.“
Under the government's na- tional maritime development programme, SCI is in the process of acquiring 76 new ves- sels at a cost of Rs15,000 crore.


 The acquisition will be com- pleted in phases by 2011-12.


 The government's proposal could help boost employment in the shipbuilding industry and help facilitate plans to di- vest stakes in state-run ship- yards that would benefit from the move, said an industry ex- pert, who didn't want to be named. “It will also help the government in further diluting its stake in SCI as it will be an- other major gainer with this,“ the expert said. The govern- ment had earlier proposed to divest a part of its stake in Co- chin Shipyard as well.
Dhananjay Datar, chief fi- nancial officer at ABG Shipyard, said the move will boost the order books of Indian ship- building companies.
“If this proposal comes into force, SCI could place orders with Indian yards as it will get preference in bidding for car- go. The quality of the construc- tion would not be compro- mised,“ Datar said.


According to Datar, very few Indian shipping companies are placing orders with Indian ship makers. “Majority of the clients are foreign shipping companies. But Indian ship makers are capable of meeting Indian shipping companies' fleet demand.“



My Comments:


I know ABG Shipyard has already doubled from years low....but then it is also down 30% from years high of 346....almost 100 points down from 52 week high and that is why I like this stock....


As one can read in the above post , ABG Shipyard has got order book of worth Rs .12,100 cr and that is huge by any standard.....
Now let us check some parametres which I use to look at...barring which my knowledge is limited....
1) eq...50 cr small for a shipping co....advantage
2)NPM is over 16% which I think is the highest in the Ind...Advantage
3)Order Book of Rs 12,100 cr which can be compared with SCI where SCI has Eq of 423 cr...Advantage ABG
4)Annual Sales turnover for last year was Rs 1412 cr and this year will easily end at Rs 1600 cr...
Now if we take order book of Rs.12,100 cr one can say that they have order booked for atleast 5 years....if we expect that sales will go up , means they will be able to finish contract worth Rs 2500 cr every year from hereon.......and hence the earnings will also go up and hence the price....
5)Mcap is 1233 cr which is alomst equal to sales butif sales increases then the Mcap will also go up.....
6) Promoters stake is 57% which is excellent andd 25% is held by DII and FII which makes 82% held by close entities....only 18% floating stock is there.....
7)Looking at the last qr ,NPM have increased ...we have to look whether that sustains or not....
 8)According to the last 9 months results , showing eps of 34, this year can end eassily with an eps of around 44 and hence the stock is available at just around 6 p/e ratio, makes it an excellent buy...
When the analyst are speaking about Indian Market not much attractive and now fully valued,and is fully priced at 17p/e.....I feel ABG Shipyard gives an excellent investment opportunity....which is available at 6 P/E.....
So according to me, ABG Shipyard is looking an excellent buy at this current rate.....
These are my views and I may go wrong so DD is must before buying it..