Extensive experience of management and established track record of operations
SOEPL, based in Maharashtra, was incorporated in 1992 and has a long track record in the Maritime sector. The promoters, Mr. Kamalkant Coudhury, Mr. Sadhna Choudhury, and Ms. Devahuti Choudhury, have extensive experience in the industry. The company's operations are managed by the promoters with support from a well-experienced senior management team. SOEPL has built strong, long-term relationships with customers and suppliers, including Indian Coast Guard, Goa Shipyard, and Mazgaon Dock Shipbuilders Ltd. Acuité believes SOEPL will continue to benefit from its key customer and supplier relationships over the medium term.
Augmentation in business risk profile
The company has recorded strong growth in operating income of Rs. 55.29 Cr. in FY2023 from Rs. 38.78 Cr. in FY2022, marking a considerable growth of ~42.56%. The growth in operating income is on account of higher order executions during the year and is backed with increasing orders received by the company for ship repairs. Further, the company has recorded revenue of Rs.68.76 Cr. in FY2024(Prov). The operating profit margins of the company have marginally moderated to 8.33% in FY2024 from 9.13% in FY2023 and 7.34% in FY2022. The company`s order book position stood at ~Rs.59.37 Cr. as of July 2024, reflecting moderate revenue visibility in the near term.
Going ahead, margins are expected to improve as the company is increasing its focus on floating dry-docking projects as well as project expansion on the ports at Gujarat which entails higher margins.
Moderate financial risk profile
The financial risk profile of the company improved though remained moderate in FY2024(Prov) marked by moderate net worth, gearing level and debt protection metrics. The tangible net worth of the firm stood at Rs. 10.68 Cr. as on March 31, 2024 (Prov.) as compared to Rs. 7.47 Cr. as on March 31, 2023 and Rs. 5.58 Cr. as on March 31, 2022. The total debt of the company stood at 6.68 Cr. as compared to Rs. 12.69 Cr. as on March 31, 2023 and Rs. 5.48 Cr. in March 31, 2022. The debt profile of the firm comprises of Rs. 1.77 Cr. of secured term loans, Rs. 1.12 Cr. USL from directors and the Rs.3.79 Cr. of short-term borrowings as on March 31, 2024 (Pov.). The capital structure of the entity remains comfortable with the gearing of 0.63 times in FY24(Prov.) as against 1.70 times in FY23 (and 0.98 times in FY22). The TOL/TNW stood at 0.99 times as on March 2024 (Prov.) compared to 2.72 times as on March 2023 and 2.31 times as on March 2022. The debt protection metrics stood stable as reflected by debt service coverage ratio of by 2.02 times in FY24 (Prov.) as compared to 2.05 times in FY23 and 2.26 times in FY22 and interest service coverage ratio stood at 4.14 times in FY24 (Prov.) compared to 3.87 times in FY23 and 3.60 times in FY 22. Further, the Debt/EBITDA levels improved to 1.14 times in FY2024(Prov.) against 2.44 times in FY2023 and 1.82 times in FY2022.
Going ahead, the financial risk profile of the company is expected to improve on account of estimated growth in tenders for ship repairs.
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Moderate working capital cycle
The working capital operations of the company improved marked by GCA days of 71 days in FY24 (Prov.) as against 137 days and 110 during FY23 and FY22 respectively. The decline in GCA days in primarily due to lower other current assets and improvement in debtor and inventory days. The debtor days in FY24 (Prov.) were 29 days, compared to 37 days in FY23 and 58 days in FY22. The average credit period allowed to customers is around 60 days. The company has good clientele base with clients like Indian Coast Guard Directorate General of Lighthouses and Lightships, Naval Dockyard, and Mazgaon Dock Shipbuilding, from whom payment is received upon project completion. The inventory days stood at 23 days in FY2024(Prov) as compared to 54 days in FY2023 and 30 days in FY2022.The creditor days stood at 36 days in FY24 (Prov.) as compared to 113 days in FY23 and 142 days in FY22. However, the reliance on working capital limits stood moderate at ~60% for the last 6 months ending May 2024.
Going ahead, working capital operations are expected to remain in similar range over the medium term.
Exposure to risks related to cyclicality of the industry and customer concentration
The company's ship repairs, and shipbuilding orders are influenced by the demand in the economy. The company's operations are tender-based and heavily rely on tenders issued by government shipping companies. Therefore, the company's performance is impacted by its success in winning tenders and by the cyclical nature of the industry caused by economic downturns. Additionally, there is a risk related to customer concentration, as the top three customers have contributed approximately ~60% of the company's revenue over the last three years.
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