UP TO 78% GAIN IN THE SHIPPING CORPORATION OF INDIA LIMITED

THE SHIPPING CORPORATION OF INDIA LIMITED

Target Price Rs. 130       Current Price Rs. 72.90    Upside: 78%

 

The Shipping Corporation of India Up to 78% Profit


The Shipping Corporation of India Limited was established on October 2,1961, by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation.

Starting out as a marginal Liner shipping Company with just 19 vessels, the SCI has to day evolved into the largest Indian shipping Company. The SCI also has substantial interests in various segments of the shipping trade. SCI’s owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels, Passenger-cum-Cargo vessels, Phosphoric Acid /Chemical carriers,LPG / Ammonia carriers and Offshore Supply Vessels. Sailing through for nearly five decades, the SCI today has a significant presence on the global maritime map.
As the country’s premier shipping line, the SCI owns and operates around one third of the Indian tonnage, and has operating interests in practically all areas of the shipping business; servicing both national and international trades.
In view of the demand from Indian trade, the SCI has diversified into a large number of areas. The SCI is today the only Indian shipping Company operating: break bulk services, international container services, liquid / dry bulk services, offshore services, passenger services. In addition, the SCI mans and manages a
large number of vessels on behalf of various government departments and organizations.
The Government of India has conferred “Navratna” status to SCI on August 1, 2008-enhanced autonomy and delegation of powers to the Company towards capital expenditure, formation of Joint Ventures, mergers, etc.

Rationale

  • STRONG TURN AROUND. Q3PAT 82 Cr V/s 76 Cr LOSS QoQ.
  • Buoyant Baltic Freight Index means better prospects.
  • A diversified fleet,expensive Real Estate in South Mumbai, a cash pile of Rs.1,300+ crore. It owns 69 Vessels to carry out Tonnage of 5.98 million DWT and 3.32 million GT.
  • TOTAL ASSETS 10892 Cr V/s MARKET CAP OF 3800 Cr.
  • Due to various positive factors for shipping business, we estimate that SCI may declare PAT of Rs 150 Crore in H2-2018 and Rs 350 Crores in FY2019.
  • In peer comparison, SCI is the cheapest stock although, SCI is the largest shipping company.
  • CURRENT MD OF SCI WAS MD OF A PRIVATE SECTOR SHIPPING CO. HENCE, UNDER HIS LEADERSHIP SCI IS EXPECTED TO BE MORE EFFICIENT AND MORE PROFITABLE.
  • Disinvestment of SCI ‘fully or in parts.
  • 353.5 kwp Solar Photo Voltaic Power plant at SCIMTI, Powai was commenced operations from January 23, 2017. In view of the benefits and actual savings derived from said solar plant, SCI has taken expansion of installed capacity of plant by around 200 kwp during FY2017-18
  • Tanker markets rallied for a while before going into a downward spiral, BDI recovered from its lowest mark and quadrupled, container revenues in the Europe sector rose significantly. The Offshore segment is also recovering by the rising world crude oil prices. On lifting of Iran sanctions, SCI, after a gap of almost four years, resumed shipments of Crude Oil from Iran in July 2016.
  • Dry bulk shipping: Strong demand improves market as it exceeds high fleet growth. Chief Shipping Analyst, BIMCO
  • It looks like 2018 will be a year that ship owners should take advantage of, as the dry bulk fleet is likely to grow at the slowest pace seen since 1999, and BIMCO sees global demand growth out stripping supply growth in 2018.
  • Due to various positive factors for shipping business, we estimate that SCI may declare PAT of Rs 150 Crore in H2-2018 and Rs 350 Crores in FY2019.
  • In view of the above, we anticipate that the stock price of SCI may hit Rs.95-98 after Q32018 results, Rs.125-130 after FY2018 results and Rs.500 within 3 years.
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