Although the world’s third busiest container port is operational again, the upheaval in shipping hasn’t ended yet. Today, the Meishan terminal at the Ningbo-Zhoushan Port in eastern China resumed operations. The port was closed for almost a fortnight after a dock worker tested positive for Covid-19. The closure resulted in supply chains going for a toss, exorbitant shipping costs, and delivery delays. Coupled with other factors, it resulted in huge demand for the dry bulk vessel. As a result, the Baltic dry bulk index skyrocketed for a 10th straight day touching an 11-year high. Huge demand across dry bulk vessels fleet catapulted the Baltic Exchange’s flagship sea freight index to its peak since mid-2010. It lifted the spirit of the shipping companies in India, too, propelling a solid upward momentum in their stocks. After scanning the relatively small population of companies operating in this space, we stopped at two companies.
1. Great Eastern Shipping Co. Ltd. (NS:GESC)
Established in 1948, the Great Eastern Shipping Company owns and operates cargo ships. GESCL’s present fleet includes 45 vessels. These vessels consist of 31 tankers (8 crude carriers, 18 product tankers, and 5 LPG carriers). The company also has 14 dry bulk carriers with an average age of 12.06 years totalling 3.68 million deadweight tonnage (or dwt). It also acts as an agent for foreign shipping companies. Note that the value of international merchandise trade for G-20 nations created a new record in the second quarter. CPB Netherlands Bureau for Economic Policy Analysis noted that global merchandise trade is stabilizing at a faster pace. Demand for commodities, especially from China, South Korea, and Japan, is fuelling shipping needs. Australia’s exports rose 10%, and Brazil exports grew 29% in April-June 2021, driven by demand for industrial and agricultural commodities. It, in turn, will push shipment value, ultimately resulting in higher shipping rates. Disruptions on port congestion, new Covid-19 variant spread, and global shipping constraints should continue to generate gains across the shipping sector.
Great Eastern Shipping’s management is deeply invested in the company, with the promoter remains constant over the last few quarters. Note that they filed an expression of interest to acquire Shipping Corporation (NS:SCI) of India from the government earlier this year. Promoters held 29.21% in the June 2021 quarter, whereas FIIs holding went up 2.9% sequentially to 21.56%. GESCL stock was up 24.9% in a year and gained 26% year-to-date. It continued its bullish trend, clocking 8.55% gains in six months, 12.47% in the last five days, and 12.75% on August 25. The scrip trades at a 23.4% discount to its 52-week high of Rs 445.
2. Seamec Ltd (NS:SEAM)
Seamec owns and operates multi-support vessels. These vessels offer marine, diving, and construction services to offshore fields in India and abroad. It provides vessel management, marine management, fire fighting, subsea construction, dive support, rescue operations, logistics, and cranage. Earlier this year, the company formed a joint venture with Nirman Vridhi Infra LLP for undertaking construction activities. Note that in April this year, Nomura Singapore bought 250,000 shares of Seamec at Rs 450 per share through a bulk deal on NSE.
Seamec’s consolidated revenue almost doubled in Q1FY2022 to Rs 73 crore from Rs 37.0 crore in Q1FY2021. From an operating loss of Rs 1 crore, it reported an operating profit of Rs 21 crore during the comparison period. It generated a net profit of Rs 13 crore from a net loss of Rs 3 crore in the first quarter of fiscal 2021. Notably, the company is almost debt-free with a net profit 5-year CAGR of 44.2%.
Interestingly, promoters’ holding has gone up from 71.96% in March 2021 quarter to 72.04% in Jun 2021 quarter. Although MFs holding remained unchanged, FIIs/FPIs increased stake by 2.34% in June 2021 quarter. DIIs, too, upped their holdings from 0.14% to 2.41%.The stock returned 77.2% in a year, 61.8% year-to-date, 50.7% in six months, 41.2% in one month, and 8.47% in 5 days. This movement confirms bullishness in the stock. The scrip trades at a 2.4% discount to its 52-week high of Rs 749.0.
Source: Investing.com