The Great Eastern Shipping Company Limited — Q4 FY25 earnings call

Call held 12 May 2025

Management summary

GE Shipping faced a challenging Q4 FY25 as the exceptional tanker market highs of the previous year (driven by Red Sea disruptions) normalized, leading to a ₹400 crore profit decline. The company is maintaining a cautious 'wait-and-watch' capital allocation strategy, opting to hold cash rather than buy vessels at current prices which they still deem historically high despite a recent 15-20% correction. Management remains focused on fleet renewal through a 'switching' strategy and has already locked in 80% of vessel capacity for FY26 at profitable rates.

Highlights

  • Consolidated Net Asset Value (NAV) stood at just over ₹1,400 per share.

  • Reported a significant ₹400 crore drop in profit compared to Q4 FY24, primarily due to weaker tanker earnings.

  • Recognized an impairment loss of approximately ₹70 crores on 3 MR product tankers due to declining asset prices.

  • Declared the 13th consecutive quarterly dividend of ₹5.40 per share; total dividend for the period was ₹35 per share.

  • Crude tanker earnings dropped by approximately $22,000 per day year-on-year.

  • Product tanker rates fell from $37,000 to $24,700 per day, while LPG carrier rates rose to $43,000 per day.

  • Fleet values saw a year-on-year decline of 15% to 20%.

  • Offshore segment gross value estimated between $500 million and $600 million.

Concerns

  • Asset Price Correction

  • Saudi Aramco Contract Cancellations

Key financials

  1. Consolidated NAV ₹1,400 0%YoY
  2. Standalone NAV ₹1,115 -1%YoY
  3. Profit Decline ₹400 Cr
  4. Impairment Loss ₹70 Cr
  5. Dividend Per Share ₹5.4 0%QoQ

What they filed

Q1 FY27: revenue up 66.9%, net profit up 159.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,354 1,237 1,223 1,201 1,242 −8%1,454 +18%1,511 +24%2,005 +67%
EBITDA654 611 502 643 728 +11%836 +37%941 +87%1,338 +108%
Net profit576 594 363 504 581 +1%813 +37%1,044 +188%1,309 +160%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentAverage EarningsYoY Rate Change
Tankers (Crude)30,000 $/day-22,000 $/day
Tankers (Product)24,700 $/day-12,300 $/day
LPG Carriers43,000 $/day7,500 $/day
Offshore——

Guidance & targets

Profitability

  • Project IRR Profitability · next 3 years · Medium confidence 10%

    Previously 15% → 10%

    We would like to make at least a 10% IRR on the ships that we buy in U.S dollar terms.

    — G. Shivakumar, CFO

Capacity

  • Vessel Capacity Lock-in Capacity · FY26 · High confidence 80%
    80% of our vessel capacity for FY ‘26 has already been locked in at profitable rates.

    — G. Shivakumar, CFO

  • Rig Repricing Capacity · next 1.5 years · High confidence 3
    That’s 3 rigs, Pritesh. 3 rigs. In the next 2 years, sorry, I included H2 FY ‘27. If you don’t include that, it’s in the next 1.5 years, yes.

    — G. Shivakumar, CFO

  • Fleet Growth Target Capacity · next 3-5 years · Low confidence 50%
    So if we can grow the fleet to 50% higher than it is today, deploying all our capital, we will be happy to do so.

    — G. Shivakumar, CFO

Risks & concerns

  • Asset Price Correction

    high

    Fleet values dropped 15-20% YoY, leading to a ₹70 crore impairment on recently purchased vessels.

    Both acknowledged

  • Saudi Aramco Contract Cancellations

    high

    Cancellations of 24-25 rigs globally have depressed day rates and created oversupply in the jack-up market.

    Management acknowledged

  • Order Book Supply Pressure

    medium

    High order books in LPG (29%) and Product Tankers (21%) could lead to future supply-side imbalances.

    Management acknowledged

  • Geopolitical/Tariff Uncertainty

    medium

    Potential U.S. tariffs on China could realign trade routes, though management expects minimal impact on crude/product trade.

    Analyst downplayed

Areas of evasion (3)

  • Stock valuation discount to NAV
  • Specific breakeven rates per segment
  • Detailed inventory turn metrics

Q&A highlights

2 direct, 1 evasive
Valuation Discount to NAV Evasive
I think you’ll have to ask your fellow investors, that you can take that offline. We are not experts on that area probably.

The stock trades at a 40% discount to NAV, and management's refusal to engage on why investor confidence is muted suggests a lack of focus on shareholder value perception.

Asked by Mohammed Farooq

Opportunity Cost of Waiting for Lower Asset Prices Direct
If you look at the last probably 18 months, right, any asset that we would have bought would have probably been between a 0 to negative return... you’ve actually been much better off waiting on the sidelines.

Justifies the company's high cash balance and low investment activity during a period of high asset prices.

Asked by Rajesh Khater

Saudi Aramco Impact on Rig Rates Direct
The big factor which happened was the Saudi Aramco actions... where they canceled contracts... latest count is for some 24 or 25 jack-up rigs... It had an impact on the market psyche as well.

Explains the sudden drop in jack-up rig day rates from $80k+ to $35k, highlighting a major sector-specific risk.

Asked by Srikar Sai

2 min read 5 chapters

Detailed narrative

Asset Switching Strategy and Impairment

GE Shipping executed a strategy over the last 18 months to sell older vessels and replace them with modern ships to maintain capacity without over-committing capital. However, a 15-20% drop in asset prices led to a ₹70 crore impairment on three MR product tankers. Management defends this by noting that the ships they sold also would have declined in value, effectively 'saving' that loss on the sale side.

Tanker Market Normalization

The exceptional tanker earnings seen in Q4 FY24, driven by the onset of Red Sea disruptions and longer routing around Africa, have largely played out. Crude tanker earnings dropped by $22,000 per day YoY, and product tankers saw a one-third decline in rates. Management expects a recovery in crude supply as OPEC pushes up quotas by 800,000 barrels per day in the coming months, which is positive for tanker demand.

Offshore Segment and Rig Repricing

The offshore market has been rattled by Saudi Aramco's cancellation of 24-25 jack-up rig contracts, which crashed day rates from $85,000 to approximately $35,000. GE Shipping has two rigs currently idling but has secured short-term contracts for them starting after the monsoon. A third rig has won a 3-year contract with ONGC, though management noted that long-term contracts are currently being awarded at lower rates than a year ago.

Capital Allocation and NAV Discount

The company remains net cash on a standalone basis, waiting for asset prices to reach 'comfort levels' before deploying capital for growth. Despite trading at a 40% discount to its ₹1,400 consolidated NAV, management declined to discuss strategies to narrow this gap, stating they are not 'stock market experts.' They have lowered their IRR expectation for new acquisitions to 10% in USD terms, acknowledging that 15% is currently too high a bar.

Supply Side Dynamics and Order Books

Management highlighted a skewed balance between an aging global fleet and a rising order book. LPG carriers have a massive 29% order book, though much of it delivers in 2027. Product tankers face more immediate pressure with a 21% order book and significant deliveries expected over the next three years (5-7% annually). Conversely, the crude tanker fleet growth has been zero, providing a more favorable supply outlook for that sub-segment.

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