Great Eastern Shipping Company Ltd: Business Strategy, Financial Performance & Growth Opportunities

Stock To Watch Out for Booming Shipping & Logistic Industry of India!

The shipping industry is considered as the backbone of any of the country’s economy, as it helps to spread a country’s goods and its name all over the world. In a large country like India, through the efficient and well-developed shipping and logistics infrastructure, it ensures the smooth conduction of trades i.e. flow of goods in the form of import and export which helps in supporting industries and employment generation. We've just got an overview of the shipping industry, so now let’s discuss a company that operates under this sector that we consider it as the best company which can deliver their investors with potential outstanding returns in the future.

The Great Eastern Shipping Ltd company is one of the largest shipping companies in India that starts its business just after the independence in the year 1948. It plays the critical role in shaping the maritime industry of India in the transportation of the several commodities like oil and natural gas which are essential for the energy needs of the country.

Company's Sources of Earnings

The GE Shipping Ltd operates under two segments, the major contributor to its revenue is its shipping business contributing about 81% and the remaining 19% is contributed by its offshore business. Let's have a detailed analysis on both.

I. Shipping Services: - The company earns more of its revenue from the shipping services which accounts for 81%. It includes transportation of various types of cargos includes crude oil, petroleum products, natural gas & dry bulk commodities. Each of this cargo can be further broken down as: -

1. Crude Oil: - The company have separate fleet for the crude oil transportation. It delivers the unrefined oil to the various parts of the world from the point of its extraction.

2. Product Carriers: - The have a total of 19 fleets that are specifically used for the petroleum products like diesel, petrol & aviation fuels for the timely and efficient transportation.

3. Liquefied Gas Carriers: - The company have 4 specialized fleet which are designed to handle the transport of highly volatile liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG).

4. Dry Bulk Carriers: - the company has the second highest fleet allocation for the dry bulk commodities like coal, iron ore, grain and more. They are mostly used to transport these types of raw materials undertaken by industrial & manufacturing sectors.

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Shipping Business Strategy

The company operates globally & covers the many major trade routes all over the world. The company has 43 vessels for different types of operations & major commodity transport, having approximately 3.2 million deadweight tonnage (DWT) as a total capacity.

The company, depending on market conditions, balanced its approach accordingly for both spot market & long-term time charters. The company inclines more towards the spot market as per its historic data which provides it with higher earnings potential during the strong demand seasons. At the same time the company also admire to the long-term time charters for stable revenue streams & risk management.

Now let’s discuss about its offshore business: -

II. Offshore Services: - This business is not directly done by the company, but it operates it through wholly owned subsidiary, Greatship (India) Ltd. This segment with 19% of the company’s total revenue.

1. Exploratory Drilling: - This company owns and operates offshore drilling rigs (jack-up rigs & semi-submersibles) which are used to locate & extract potential hydrocarbon reserves underneath the seabed for the purpose of exploring oil & natural gas.

2. Vessels for various purpose: - The company have platform supply vessels (PSVS) which they use for in oil rigs & production platforms for equipment, supplies & personnel transportation. Multipurpose support vessels for underwater inspections, construction support & platform maintenance & management.

Offshore Business Strategy

Through its subsidiary, Greatship (India), its offshore business is not limited to India only but also have a global presence. With its state-of-the –art vessels, such as jack-up rigs, PSVs, AHTS, and more, it is able to deliver its support for ultra-deepwater exploration activities. On top of that, the company has also involved in dredging services along with its expertise in deepwater exploration for hydrocarbons.

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Financial Ratios and Performance

The company's financial looks pretty much good. As its P/E Ratio is around 4.5 times and P/B Ratio under 1, ROE as 20.97% and an impressive EPS of over 200 sets an example that describes any potential undervalued stock for considering as an investment.

Moreover, huge cash equivalents & reserves of Rs 5,279 and Rs 13,356 respectively could benefit the company for the potential strategic investments & acquisitions and also protects it from any economic downturns.

Final Opinion

The GE Shipping Ltd, with huge cash in pocket of Rs 5,279, is focusing on modernizing its shipping fleets while selling its older fleets for good consideration of cash. The company is doing so that it could adopt new technology for the purpose of achieving efficiency & to meet global standards and regulation in terms of its practices of decreasing its carbon emissions. And as far as the future outlook and opportunities are concerned, the country has a wider scope in expanding its global trade, for more economic gains. Just for the perspective, if you compare total trade done by India & China during the last fiscal year, you can easily see a huge difference, where India trades only USD 776.68 billion for exports and USD 854.80 billion for imports, the China stands tall with its huge trade numbers, with USD 3.58 trillion for exports and USD 2.59 trillion for imports of trade (those are the last fiscal year’s trade numbers).

So, you see despite of having same population & choosing the way of development like China, there is huge definite global trade opportunity with immense growth ahead. And the company like GE Shipping Ltd, would has huge potential to get the most out of it in order to become a global shipping & logistics giant.

DISCLAIMER: we are not SEBI –registered, all the above information is for education purpose only, consult with your financial advisor or do your own research before investment.