Transworld Shipping Lines LtdQ2 FY18Transport Services

Transworld Shipping Lines Ltd

Q2 FY18 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Revenue guidance

Category 3

→Shreyas Shipping expects volume growth of around 10% year-on-year despite 20% capacity addition.
→The company plans to rationalize capacity by chartering out some vessels to better align with demand and improve margins.
→Post-monsoon and festival seasons (Onam) typically see volume fluctuations but volumes are expected to pick up again.
→Additional feeder contracts, including expansion to Colombo and coastal operations, are expected to boost volumes.
→Growth is largely driven by increased EXIM feeder volumes and domestic coastal trade, especially on the west coast of India.
→While market volume growth was subdued in Q1 FY19, management anticipates gradual recovery and volume growth through the rest of the year.
→Relaxation in cabotage rules is not expected to greatly increase competition or capacity but may lead to modest incremental volume growth.

Category 3

→The company expects volume growth of around 10% year-on-year for TEUs handled in FY19 despite a 20% capacity addition.
→EBITDA margins are targeted to sustain in the range of 15% to 18% for FY19, improving from around 9% in Q1 FY19.
→Price hikes of about 7% to 8% are anticipated to partially offset rising bunker fuel costs and improve profitability.
→Debt level is expected to close around Rs.300 crores by FY19 end, supporting growth investments.
→Planned CAPEX of approximately Rs.60-70 crores is aimed at vessel replacements to maintain and enhance operational efficiency.
→The management expects gradual recovery in domestic pricing power due to tonnage rationalization and market improvements, supporting future earnings growth.
→Insurance claims related to operational incidents (e.g., SSL Kolkata) have no negative impact on profitability as costs are covered by insurers.

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→The company expects a closing debt figure of around Rs. 300 crores for FY19 (Rajesh Desai, Page 16).
→Plans to invest about Rs. 60-70 crores in FY19 primarily for vessel replacement and acquisition (Capt. Vivek K Singh, Page 9).
→Vessel acquisitions and replacements are being approached cautiously due to upcoming regulations on sulphur content (Page 9).
→No explicit mention of any new equity fundraising in the current call transcript.
→Debt is mostly in foreign currency borrowing, aligned with dollar earnings to hedge currency risks (Pages 13-14).
→The company is managing capacity and vessel deployment via charters and acquisitions rather than aggressive asset purchases currently (Page 15).

→The transcript does not explicitly mention the current or expected order book or pending orders in numeric detail.
→There is discussion about ongoing tender participation: The technical bid process is underway for a sector, with commercial bids expected by the end of August 2018.
→If Shreyas Shipping wins this tender, additional tonnage will be deployed in the second half of FY19.
→The company plans to add capacity cautiously, considering the upcoming 2020 sulfur emission norms and high vessel purchase prices.
→Capex plans include acquiring one smaller vessel and one larger vessel as replacements, with expected investment around Rs. 60-70 crores for FY19.
→SSL Krishna was added recently; SSL Kolkata is out due to an explosion incident.
→There are no specific figures on total pending orders or firm contracts disclosed in this transcript.

Yes

→The company plans to continue its replacement program of older tonnage, but is proceeding cautiously due to upcoming 2020 regulations on sulfur content and high vessel purchase prices.
→For FY19, Shreyas Shipping expects a capital investment of around Rs. 60 crores.
→This includes acquisition of one smaller vessel and one larger vessel, in addition to the SSL Krishna vessel already taken delivery of in Q1 FY19.
→The company is monitoring market conditions closely to time vessel purchases optimally.
→Additional tonnage deployment may be required if new tenders, such as those from Container Corporation of India (CONCOR), are won.
→No major new capital expenditure announced beyond the vessel replacements and potential expansion linked to new contracts.

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