GE Shipping hits over 14-year high, stock zooms 83% thus far in 2022

For the April-June quarter (Q1FY23), GE Shipping reported a jump of 142 per cent in consolidated net profit at Rs 457 crore as against Rs 189 crore in Q4FY22.

Shares of Great Eastern (GE) Shipping Company hit an over 14-year high of Rs 545, as the stock rallied 5 per cent on the BSE in Tuesday’s intra-day trade in an otherwise range-bound market owing to healthy earnings and strong outlook. In comparison, at 10:45 am; the S&P BSE Sensex was down 0.34 per cent at 58,571, after hitting a high of 59,068 in intra-day trade.

The stock of shipping company traded at its highest level since January 2008. It quoted close to its record high level of Rs 572 touched on December 31, 2007. Thus far in the calendar year, GE Shipping has outperformed the market by surging 83 per cent, as compared to 1 per cent decline in the S&P BSE Sensex.

For April-June quarter (Q1FY23), GE Shipping reported a 141.8 per cent quarter-on-quarter jump in consolidated net profit at Rs 457 crore over Rs 189 crore posted in March quarter (Q4FY22). The company posted profit of Rs 12.36 crore in year ago quarter (Q1FY22). Revenue from operations grew 78 per cent year-on-year and 49 per cent sequentially at Rs 1,366 crore during the quarter.

Important and significant factor is the change in the net asset value from March level of about Rs 618 on standalone basis, has now gone up to Rs 732. In June quarter, the company earned Rs 48 of cash profit per share, the management said in Q1FY23 earnings call.

A long period of under investment in oil and gas production seems to have caught up with the oil market, and there’s much more activity coming up in certain areas and that’s boosting demand for rigs and vessels.

The Baltic Dry index which is globally accepted benchmark for providing the sea freight by various categories of bulk carriers has phenomenally increased by 60 per cent in 2022. Later part there was some correction due to perceived negative impact of short-lived Omicron. Analyst predicts that freight rate will be moderately high in 2023.

Currently, the outlook for dry bulk carrier markets for 2022 seems to indicate a reasonably firm rate environment. Much like 2021, this could be due to low fleet growth and possible strong congestion (supported by record high container rates). The risk to rates are potential aggressive moves by China to cap commodity imports to prioritize domestic output instead (e.g. coal), continuous steel production cuts in China to prioritize emission controls, potential drought in South America that could reduce grain exports from the region and the Russia-Ukraine conflict that can have a negative impact on grain exports and other commodities, GE Shipping said in its FY22 annual report.

Crude tanker freight rates remained around opex levels for most of the year in FY22 but experienced a sudden spurt starting end-Feb 2022 due to the Russia-Ukraine conflict.

“Rates witnessed a sudden spurt in March 2022 due to the Russia-Ukraine conflict, which prompted western countries to impose sanctions against Russia. Although energy was excluded from the sanctions, the usual trade patterns were disrupted by self-sanctioning by many companies and owners’ unwillingness to all Russian ports. As usually happens, the inefficiency caused by the disruption led to more demand for ships, which pushed freight rates up. This was more pronounced in the Aframax sizes,” GE Shipping said.

Technical View

Bias: Positive

Support: Rs 535, Rs 503

Target: Rs 560

The short-term trend for the stock turned positive on July 20, 2022, since then the stock has gained 25 per cent till date. After a brief consolidation in the Rs 500-525 band in August, the stock has today broken out of the trading range backed by a spurt in volume.

As per the weekly chart, the stock has been treading along the higher-end of the Bollinger Band on the weekly chart since mid July, and consistently found support around the same. 

The chart, indicates support for the stock around Rs 535-level, below which the next significant support is seen at Rs 503 - its 20-DMA. On the upside, the stock can rally towards the higher-end of the Bollinger Band on the daily chart at Rs 560-odd level.

(With inputs from Rex Cano)