Shiv-Vani Oil & Gas Exploration Services
Cluster: Ugly Duckling
Recommendation: Buy
Price target revised to Rs482
Result highlights
The Q2FY2009 numbers of Shiv-Vani Oil and Gas (Shiv-Vani) are marginally above our expectations. The top line grew by 92.4% year on year (yoy) to Rs187.2 crore, which is more or less in line with our estimate.
The operating profit margin (OPM) improved by 170 basis points to 39.3% on account of better realisations and improved efficiencies. Consequently, the operating profit grew by 101% to Rs73.7 crore.
The results contain an exceptional gain of Rs17.16 crore on account of foreign exchange (forex) fluctuations. Treating the same as an extraordinary item, the adjusted profit (adjusted for taxes) grew by 75.5% to Rs34.7 crore. That is a little more than our expectation of Rs33.4 crore. Accounting for the forex gain, the reported profit grew by 140% to Rs47.6 crore.
Shiv-Vani currently has a fleet size of 32 rigs while another three to four rigs are awaiting custom clearance. The plans are on track to take the total fleet size to 40 rigs by the end of the year.
The company’s extremely strong order book of about Rs4,700 crore (about 8.2x its FY2008 revenues) provides strong visibility to its future revenues. What’s more, the order book is likely to improve with the company bidding for more orders.
At the current market price, the stock discounts at 6.4x its FY2010E earnings and is quoting at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4.9x. With its integrated business model and as the country’s largest onshore oilfield service provider, Shiv-Vani deserves a premium valuation over some of its global peers, which mainly concentrate on one business segment. We maintain our Buy recommendation on the stock with a revised price target of Rs482 (10x FY2010E earnings).
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