Sharekhan maintains 'Buy' on Shiv-Vani with target of Rs 370
Sharekhan has maintained Buy recommendation on Shiv-Vani Oil and expects an upside of 13 per cent from Rs 328 levels.
By ET Bureau |
MUMBAI: Sharekhan has maintained Buy recommendation on Shiv-Vani Oil and expects an upside of 13 per cent from Rs 328 levels.
"Shiv-Vani Oil & Gas Explorations is India's largest onshore oil and gas services provider in the private sector having a fleet of 37 rigs and ten seismic survey crews. The company offers a wide range of services including seismic, drilling, and other specialised services, such as work over, gas compression services and coal bed methane (CBM) integrated services. Its extremely strong order book of Rs 4,250 crore, which is more than 5x its FY2009 revenues, renders strong visibility to its earnings. It has done timely expansion of its assets in the past and all its assets are already backed by contracts in hand. Its fleet size would soon be raised to 40 rigs with about three rigs in the shipment stage. With better fleet utilisation, the company is likely to maintain its current margins. We expect the top line to grow at CAGR of 19.7% and the bottom line at a CAGR of 15.8% over FY2009-11.
The softening day rates, and the curtailment and deferment of worldwide E&P capex pose a risk to the company going forward. Moreover, any delay in contracts or any renegotiation of contracts going forward could potentially hamper its cash flows and remains a risk. Though any renegotiation of its contracts is unlikely since the bulk of its contracts are from public enterprises like ONGC and OIL. At the current market price, the stock trades at 7.1x its FY2011E earnings and is quoting at an enterprise value/earnings before interest, depreciation, tax and amortisation of 5.8x. We maintain our Buy recommendation on Shiv-Vani with a price target of Rs 370," said the Sharekhan note.
"Shiv-Vani Oil & Gas Explorations is India's largest onshore oil and gas services provider in the private sector having a fleet of 37 rigs and ten seismic survey crews. The company offers a wide range of services including seismic, drilling, and other specialised services, such as work over, gas compression services and coal bed methane (CBM) integrated services. Its extremely strong order book of Rs 4,250 crore, which is more than 5x its FY2009 revenues, renders strong visibility to its earnings. It has done timely expansion of its assets in the past and all its assets are already backed by contracts in hand. Its fleet size would soon be raised to 40 rigs with about three rigs in the shipment stage. With better fleet utilisation, the company is likely to maintain its current margins. We expect the top line to grow at CAGR of 19.7% and the bottom line at a CAGR of 15.8% over FY2009-11.
The softening day rates, and the curtailment and deferment of worldwide E&P capex pose a risk to the company going forward. Moreover, any delay in contracts or any renegotiation of contracts going forward could potentially hamper its cash flows and remains a risk. Though any renegotiation of its contracts is unlikely since the bulk of its contracts are from public enterprises like ONGC and OIL. At the current market price, the stock trades at 7.1x its FY2011E earnings and is quoting at an enterprise value/earnings before interest, depreciation, tax and amortisation of 5.8x. We maintain our Buy recommendation on Shiv-Vani with a price target of Rs 370," said the Sharekhan note.
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