Stocks of shipbuilding companies have been re-rated on the back of rising order book-to-sales to over seven times. The stock price of ABG Shipyard has gone up 267 per cent, while Bharati Shipyard is up 107 per cent over the last one year.
The gain has been higher in the case of ABG Shipyard, thus stretching its valuation at 33 times its FY08 estimated earnings. Bharati Shipyard is still trading at a comfortable 18 times estimated FY08 EPS and 13 times FY09 EPS.
Also, its current order book of about Rs 4,639 crore (11 times its FY07 revenue) is strong enough for maintaining 50 per cent growth for the next three years.
Bharati is building a greenfield shipyard which will enable it to build six vessels up to 60,000 dwt (dead weight tonne) against 15,000 dwt currently by December 2008. This will enable Bharati to improve its execution speed and bid for more projects.
Besides, it is planning to invest Rs 2,000 crore along with Apeejay Shipping to set up a shipbuilding yard on the eastern coast, which will be commissioned in FY 2011. A relatively lower valuation and strong earnings visibility makes this stock an attractive investment.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment