Bharati Shipyard is a leading Indian private sector shipyard engaged in design and construction of Sea-going, Coastal, Harbour, Inland crafts and vessels. The product range which initially was limited to simple inland cargo barges, deep-sea trawlers and dredgers has now been upgraded to building maneuverable and power-packed Ocean Going Tractor Tugs, Cargo Ships, Tankers and other support vessels required for the offshore industry.
The company has pioneered in the building of various types of ships and provided ship repair services in the private sector from its shipyards located at Ratnagiri and Ghodbunder (Thane), along west coast of the country.
The company has a enviable list of clients, both in the domestic as well as in the export markets. In the domestic markets, clients include the port trusts of Mumbai, Calcutta and Chennai, GE Shipping and RIL. On the overseas front, the clients include Qatar Shipping Co, Al Jaber Est., Abu Dhabi and Halul Offshore Services, Qatar.

The total order book position of the company at the end of September 2006 quarter was at Rs. 2300 crores. Of this, Rs. 1840 Crores worth of contracts is unexecuted. This means that the unexecuted part of the order book to the total sales in FY06 of Rs. 295 crores stands at 6.3x. This signifies a robust business position of the company.
On the other hand, the company has committed itself to expanding its present capacities. In the current fiscal, Bharati is investing around Rs 110 crores as capex in various ship yards and expansionary projects. The break up of this is expected to be Rs 25 crores in expansion at Ratnagiri. Rs 50 crores in the greenfield shipyard at Mangalore and lastly, Rs 35 crores in setting up three wind turbines. Going forward too, in the next fiscal the company has drawn up plans to invest around Rs. 200 crores in the Mangalore project.
Apart from this, during 2QFY07, Bharti Shipyard became the first ever Indian private sector company to receive an order to build an offshore oil rig for Great Eastern. For this, the company has entered into technical collaboration with Le Tourne of US. In this, Le Tourne will be responsible for the supply of critical machinery which is required for the construction of the rig. Going forward, with the increase in offshore activities by all the major exploration companies, this contract will provide a better stage for pre-qualification.

At the current market price of Rs. 404, the scrip trades at 18x its historic earnings. For 2QFY07, the company witnessed a 60.42 per cent growth in its bottom line to Rs. 12.66 crores as compared to Rs. 7.89 crores in the previous corresponding quarter. On a QoQ basis, the bottom line growth was at 4.48 per cent.
Going forward, we see a favorable business scenario. On one hand, there is a substantial increase in interest in the Indian ship building industry from overseas clients due to availability of cheaper labor as compared to other ship building nations. Apart from this, the oil and gas offshore exploratory activities and investments thereon are expected to be buoyant. These are expected to keep the revenue and order pipeline of the company robust. This is expected to ensure, that at least the current momentum of growth is sustained.
Therefore, we at SAANS believe that the scrip is a good buy both for medium and also for long term investors taking into consideration the growth momentum, favorable business scenario, increasing capex plans and expectation of continued support from the government on this highly capex driven industry.

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