Great Eastern Shipping shares gained nearly 3% on Monday after Nomura retained its Buy rating on the stock and set a target price of Rs 1,965, indicating further upside from current levels.
The brokerage’s estimates is not simply based on the current shipping cycle. It centres on the company’s strong balance sheet and its ability to use its cash reserves to expand its fleet when vessel prices become more attractive.
Nomura believes Great Eastern Shipping is better placed than many peers to handle a potential downturn in freight rates, while also having the financial flexibility to turn a weaker cycle into an opportunity.
Great Eastern Shipping had around Rs 8,000 crore of net cash as of the first quarter of FY27, according to Nomura. The brokerage sees this as more than just a balance-sheet cushion.
The company has indicated that it could move quickly to acquire vessels if the shipping market weakens and asset prices fall to levels that meet its return requirements. Nomura said the cash reserve could allow the company to roughly double its fleet if the right opportunity emerges.
This approach fits with Great Eastern Shipping’s long-standing preference for conservative capital allocation. The company has historically relied on internally generated cash for expansion and has not raised equity capital in the past three decades.
Nomura expects the company’s fleet to expand from around 40 vessels currently to 62 by FY29, including additions across crude, product and dry-bulk carriers. The brokerage believes buying vessels during a downcycle could allow the company to increase its scale without putting pressure on its balance sheet.
The outlook is not without challenges. Nomura expects crude and LR tanker rates to fall sharply in FY28 as trade routes normalise and vessels ordered over the past few years enter the market.
However, the brokerage believes Great Eastern Shipping’s fleet expansion could partly offset the earnings pressure from lower rates. It also points to the company’s diversified exposure to LPG and dry bulk, along with its offshore business, as additional sources of support.
Nomura values the company using its net asset value rather than earnings, given the highly cyclical nature of shipping. It has set a target of Rs 1,965 based on 0.75 times September 2028 estimated ex-cash NAV, plus net cash. From the live price of Rs 1,540.90, this implies around 28% upside.
The company has also announced a buyback of 5.9 million shares, or around 4% of outstanding shares, at a maximum price of Rs 1,530 per share. Nomura noted that the company’s preference for retaining cash is linked to its intention to deploy capital into ships when the cycle turns.
Great Eastern Shipping shares were trading at Rs 1,540.90, up 2.93% on Monday afternoon. The stock has gained 3.79% over the past week and 54.89% over the past year.