Colombo Dockyard 3QCY11 Results Update

ransi Wed Dec 07, 2011 1:21 pm

Colombo Dockyard’s (DOCK) net profit declined 42.7% YoY to LKR455.5m in 3QCY11. Revenue from the high-margin ship-repair segment declined 13.9% YoY to LKR1.2bn in 3QCY11, due to effects of sluggish global economic conditions slowing down the demand for ship-repair facilities. Further, revenue from the ship-building business also declined 34.6% YoY to LKR2.1bn largely due to the change in the revenue recognition policy. DOCK has secured ship-building contracts to operate at full capacity in CY12 and CY13. DOCK continues to be cash-rich (LKR58/share as at 3QCY11), and expect net profit CAGR of 30.4% over CY11-13, enabling it to sustain ROEs of 23.7%. We have revised our projected net earnings downwards by 24.1% to LKR1,794.6m (up 4.1% YoY) in CY11ii, owing to the slowdown in the ship-repair business. We retain BUY with a reduced TP of LKR290 (revised by 14.7%).

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