Shipping Corporation of India - Operational performance continues to be weak - Kotak

Subdued shipping market, high interest cost and high other operational cost has resulted in weak numbers in the quarter. Revenue was reported at Rs 9.6 bn (flat QOQ and -17% YoY) amidst growing fleet. With lower bunker cost and cost of repairs, the company has reported improved operational performance. However with weak shipping market and high fixed cost, the company has reported net loss in the quarter. This is eight quarter of net loss for the company. Poor performance was reported by bulk and liner segment.

The company has sold one AHTS and one bulk carrier in the quarter making a gain of Rs 171 mn. Interest income of the company has fallen to Rs 271mn (-20% YoY) as the company has utilized cash reserves of almost Rs 5 bn YoY to pursue its capex programme. Interest and depreciation cost has also gone up. Consequently the company reported a Net Loss of Rs 985 mn.

Margins would continue to be under pressure due to poor freight market, high bunker cost, higher port charges, high insurance cost and higher cost of in chartered vessels. We estimate the company to perform poorly on profit parameters. We value SCI based on 0.4x replacement value or NAV of Rs 70. We recommend REDUCE with a price target of Rs 28.

Source : Equity Bulls

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