Shipping Corporation of India’s (SCI) Q1FY17 results were below our estimates across all parameters. Revenues sequentially declined 13% (down 23% YoY) to | 841 crore (I-direct estimate: | 971 crore). Revenues from the liner segment approximately halved to | 90 crore in Q1FY17 compared to | 164 crore in Q1FY16. Revenues for tankers, bulk, offshore segments de-grew 17%, 26%, 36%, respectively • Higher cargo handling expenses coupled with increased repairs and maintenance charges adversely impacted EBITDA, which de-grew 40% YoY (down 28% QoQ) to | 214 crore (I-direct estimate | 272 crore). Subsequently, EBITDA margins were negatively impacted by 754 bps YoY (down 531 bps QoQ) to 25.4% (vs. our estimate of 28%).

Valuation: They believe that a ramp up in this subsidiary remains key for an upgrade. However, given the current subdued scenario, They continue to retain HOLD recommendation on the stock with a target price of | 63.