Bharati Shipyard

Shipyard companies are trading at low valuations given that there is lull in the industry and concerns over new orders. In case of Bharati Shipyard though, its strong order book provides confidence.

The same currently stands at about Rs 5,000 crore, which is more than five times the company’s 2008-09 sales providing good revenue visibility for the next two years. The concerns over visibility in new orders have also meant that the companys stock is currently available at 4-5 times its 2010-11 estimated earnings. On the back of its order book, analysts are expecting the company to register a good revenue and net profit growth in 2010-11. Bharati has been eyeing orders from other segments like defence to counter the slowdown in the offshore segment. The defence sectors orders are expected to flow in the near future considering that India is looking for reducing its dependence on imports. However, as Bharati generates a large part of its revenue from the offshore vessels, revival in the offshore activity is critical. If the revival happens on the back of the improvement in the global economy, Bharati will benefit on two counts.

Firstly, due to its presence in the shipbuilding space and secondly, due to its recent acquisition of Great Offshore, which is a forward integration given that the latter is in the business of providing offshore oil services.