Bharti Shipyard is expected to sail through Tidal Times mainly due to jump in steel price and jump in working capital due to delivery delays and need to keep higher raw material inventory.
Bharati has order backlog of 5.6x FY08 sales and has its yards full till mid FY11. Significant quantum of repeat orders, robust financial of key customers and an order book skewed in favor of offshore vessel and bulk carriers indicates very low risk of cancellation, in our view.
Merill Lynch has cut DCF-based target price on Bharti Shipyard to Rs625. Merill expects Bharti to report an EPS of Rs 39.23 and Rs 52.84 for FY09 and Fy10 respectively. You can also read Citigroup’s coverage on ABG Shipyard and Bharti Shipyard.