Pipavav Defence and Offshore Engineering - Set to meet future needs - Kotak

PDO the new venture of the SKIL group is one of the five largest docks in the world and largest in the country and is well equipped to accommodate ship of any size. It is presently constructing commercial vessels (Panamax) and would also construct ships for the navy and the coast guard in the future. A part of the shipyard would be dedicated to the offshore segment involved in construction of jack up rigs, floating rigs and other offshore equipment. The strength of the shipyard involves 1) Huge Size; 2) Good Infrastructure and strong execution capabilities; and 3) Focus on defence sector.

But weak shipping and shipbuilding market could lead to poor inflow of fresh orders in the commercial segment atleast for the next three to four quarters. However we estimate PDO to capitalize on the huge opportunities in defence and offshore market in future.

We expect its revenues to grow at a CAGR of 30% over FY12 to FY14E to Rs 31bn. Taking into account a lackluster shipbuilding environment; we initiate coverage on the stock with an Accumulate rating.

Source : Equity Bulls

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