Reiterate Buy on Great Offshore - Motilal Oswal

Great Offshore Ltd. (GOFF IN; Mkt Cap USD 240m, CMP Rs 294, Buy)

Great Offshore results were a shocker with profits down by 96% y/y. We had estimated that this quarter would be bad and had one of the most conservative estimates for FY11 when we released our initiating coverage report. However, the company failed to meet even our pessimistic estimates for the quarter.

Revenues degrew by 22% on account of rig days than our estimates, lower engineering business revenues and lower day rates in the offshore business.

Fixed costs due to specialized nature of operations and drop in revenues caused operating profits to drop y/y.

Addition of assets over last year bumped up depreciation and interest leading to a sharp drop in profits y/y

Given the lower than estimated earnings for 3QFY11, we have downgraded our earnings for FY11 sharply and for FY12 by 10%.

Given our downgrade of earnings by 10%, we have also downgraded our target to Rs. 480.

We believe that most of the pain for investors is a bygone and positive earnings momentum from here on given the low base effect of earnings in FY11 and potential positive news flow makes the stock a good bet at these beaten down valuations.

Reiterate BUY.

Source : Equity Bulls

Keywords