Why is GE Shipping up 2% (28 Sep) | Nomura Sees 31% Upside.

Shares of Great Eastern Shipping Company, also known as GE Shipping, are in focus on Monday, September 28, after Nomura started coverage on the stock with a "Buy" rating and a target price of Rs 1,965 per share. The target implies a potential upside of about 31% from the previous closing price of Rs 1,500.

Nomura said GE Shipping has a large cash balance that could support fleet expansion if the global shipping cycle turns weaker. The brokerage described the company as a cyclical compounder and said its cash position gives it room to fund its next phase of growth.

The stock ended the previous session 1.2% higher at Rs 1,500. GE Shipping shares have gained 11.9% over the past month and 34.6% so far this year, according to the supplied material.

Nomura sets Rs 1,965 target price

Nomura has started coverage of GE Shipping with a "Buy" rating and a target price of Rs 1,965. At the previous closing price of Rs 1,500, the target represents a gap of Rs 465 per share, or about 31%.

The brokerage's view is based partly on GE Shipping's cash position and the nature of the shipping business. Shipping companies can see large changes in earnings and asset values as freight markets move through different parts of the cycle. Nomura believes GE Shipping's balance sheet can help the company respond if the current shipping upcycle weakens.

The brokerage said the company had Rs 8,000 crore in cash as of the June quarter. That amount was equal to 30% of its net asset value and 38% of its market capitalisation, according to Nomura.

Particulars	Details
Previous closing price	Rs 1,500
Nomura target price	Rs 1,965
Implied upside	About 31%
Cash balance	Rs 8,000 crore
Cash as share of NAV	30%
Cash as share of market capitalisation	38%

GE Shipping's cash position and fleet plans

Nomura said GE Shipping's cash pile could be used to increase the company's fleet when the shipping cycle turns negative. The brokerage believes the available cash could support a doubling of the existing fleet once market conditions become less favourable.

This view is based on the company's financial position rather than a confirmed fleet expansion announcement in the supplied material. The source does not provide a specific acquisition schedule, vessel count target or spending plan.

GE Shipping's cash balance is therefore an important part of Nomura's coverage thesis. A large cash position gives the company financial capacity to act when vessel valuations or other market conditions create opportunities.

The shipping cycle also remains important to the company's asset values. Nomura said GE Shipping's net asset value grew at a 27% compound annual growth rate between FY2021 and FY2026.

Net asset value grew at 27% CAGR

Nomura attributed much of the growth in GE Shipping's net asset value to operating cash flow and higher asset values.

Operating cash flow grew at a 13% CAGR over the same FY2021 to FY2026 period. The brokerage also pointed to higher asset values during a period when the global shipping market remained in a strong upcycle.

Nomura linked the strong shipping market to disruptions in local trade flows caused by the Russia Ukraine war and the West Asia conflict. These disruptions have affected shipping routes and trade patterns, supporting the broader market conditions discussed in the brokerage's coverage.

For readers tracking the shipping sector, GE Shipping's financial performance therefore needs to be viewed alongside freight markets and asset values. The company's cash generation is another factor because it determines how much capital can be retained for future fleet investments.

The shipping sector has also featured in other recent brokerage coverage. Nomura's view on Petronet LNG volumes shows how brokerage estimates can focus on changes in operating conditions and future business volumes.

GE Shipping reports strong first quarter results

GE Shipping also reported a strong first quarter performance. Its net profit more than doubled to Rs 1,309 crore, compared with Rs 505 crore in the same quarter of the previous year.

Revenue increased 66.9% to Rs 2,005.4 crore from Rs 1,201.5 crore in the first quarter of the previous financial year.

Financial metric	Q1 current year	Q1 previous year	Change
Net profit	Rs 1,309 crore	Rs 505 crore	More than doubled
Revenue	Rs 2,005.4 crore	Rs 1,201.5 crore	66.9% higher

The earnings add another part to the current GE Shipping story. Alongside the cash balance, the company has reported higher profit and revenue during a strong period for shipping markets.

The earlier results of other companies have also drawn fresh brokerage attention, including Cholamandalam Investment's Q1 profit, where Nomura also updated its view after the quarterly numbers.

GE Shipping stock performance

GE Shipping shares closed the previous session at Rs 1,500, after rising 1.2% during the session. The stock has moved higher over both the one month and year to date periods cited in the source.

Stock performance	Change
Previous session	1.2% higher
One month	11.9% higher
Year to date	34.6% higher
Previous closing price	Rs 1,500

The stock's recent movement comes before Nomura's new coverage and target price are considered. The Rs 1,965 target is a brokerage estimate and should not be treated as a confirmed future share price.

The source also says all three analysts covering GE Shipping have "Buy" ratings, with Nomura having the highest target price among them.

What investors should watch

Investors tracking GE Shipping will be watching the shipping cycle, asset values and the company's ability to generate operating cash flow. The company's cash balance will also matter if it decides to expand its fleet as market conditions change.

The next quarterly results can provide more information on revenue, profit and cash generation. Changes in global shipping conditions can also affect the value of GE Shipping's fleet and its net asset value.

Nomura's target price remains an estimate based on its analysis. The supplied material does not provide a separate company target or management forecast for the stock price.

About GE Shipping

Great Eastern Shipping Company is a shipping company whose financial performance is linked to global shipping conditions and the value of its fleet. The supplied material focuses on its cash position, operating cash flow, net asset value and quarterly financial performance.

The company's reported Rs 8,000 crore cash balance is a major part of Nomura's current assessment. The brokerage also expects the balance sheet to give GE Shipping room to consider fleet expansion when the shipping cycle changes.

Frequently asked questions

What is Nomura's target price for GE Shipping?

Nomura has set a target price of Rs 1,965 per share for GE Shipping with a "Buy" rating. The previous closing price was Rs 1,500, making the target about 31% higher than that level.

How much cash does GE Shipping have?

GE Shipping had Rs 8,000 crore in cash as of the June quarter, according to the brokerage's coverage. Nomura said this was equal to 30% of the company's net asset value and 38% of its market capitalisation.

How did GE Shipping perform in the first quarter?

GE Shipping reported net profit of Rs 1,309 crore in the first quarter, compared with Rs 505 crore a year earlier. Revenue rose 66.9% to Rs 2,005.4 crore from Rs 1,201.5 crore.

How much has GE Shipping stock gained?

GE Shipping shares gained 11.9% over the past month and 34.6% so far this year, based on the performance cited in the supplied material. The stock closed the previous session at Rs 1,500.

Why does Nomura expect GE Shipping to handle a shipping downturn?

Nomura believes GE Shipping's Rs 8,000 crore cash balance can support fleet expansion if the shipping cycle turns negative. The brokerage said the cash could potentially help the company double its existing fleet when conditions create opportunities.