by khalid on 11/10/2011 · 0 comments

ABG shipyard Ltd is noted to be the largest player in the shipbuilding category in India within the private sector. The current order book shows impressive figures and a promising future that holds for the company with projects worth Rs. 158 billion. The fundamentals also look strong and overall view of the stock listed on both BSE and NSE seems positive.

On the financial forefront, the stock, the company has shown superior performance in sales with an expected CAGR hovering around 16% for the next financial year. However, the anticipated rise in fixed costs of the industry makes us bring down the estimates of EBIDTA margin to roughly about 25%. Post the capacity expansion being undertaken at Dahej Shipyard, such margins are expected to decline further to 18% or so. This is primarily because projects under subsidy from government are expected to be complete and fixed capital costs shall be on the rise.

But we can presume the negative to end just there because the lack of strong player in the industry makes ABG a very strong candidate to bag the deal by the government in manufacture of the sophisticated defence vessels. Also the rise in the worldwide demand for offshore support vehicles and jack up rigs is expected to benefit the company.

The global competition is strong in the shipbuilding sector and this is a major challenge that ABG needs to contend in order to expand as a global player where there is no subsidy available.

‘Bell the bull says’ that given the present slump in global market, the stock should be correctly priced around Rs. 370 on the

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