What led to the price of GE Shipping stock doubling in 2022

Shipping stocks have never been in the limelight in the last few years with shipping rates having been under pressure. However, things appear to have changed in the current year and the best example is one of India’s oldest shipping companies, The Great Eastern Shipping Company Ltd or GE Shipping. Now, since January 2022, the stock of GE Shipping has rallied from Rs296.45 to the level of Rs666.70, an appreciation of 125% over the last 11 months. That is not the kind of returns you would normally get to see in the GE Shipping counter. What is it that has driven this rally in GE Shipping. Check the chart below.

Data Source : BSE

The chart above is not only reflective of a secular rise in the stock price but the stock has also been making consistently higher tops and higher bottoms, a clear bullish signals. The 125% rally in the stock of GE shipping is against a 5% in the Sensex during the same period, so it is an outperformance by a huge margin. In fact, the stock of GE Shipping has jumped by 26% in the last one month itself. Clearly, the recent rally in the stock has been driven by the Q2FY23 results which has been extremely impressive.

For the quarter ended September 2022, GE Shipping reported a 3-fold rise in net profits at Rs731 crore on the strength of better operational performance on a yoy basis. In the corresponding quarter in FY22, the net profits were just Rs206 crore. It was not just the bottom line but even the top line revenues grew in a robust fashion. The sales revenues for the quarter were up 78% yoy at Rs1,700 crore compared to just Rs954 crore in the second quarter of FY22. What is it that led to such strong numbers and such a robust improvement in the business outlook for GE Shipping.

Firstly, it must be remembered that the dry bulk rates were under pressure during the year, so all was not hunky dory for the company. However, the weak dry bulk rates were more than compensated by the robust in the crude and the product tanker freight market. While the dry bulk prices fell by around 15% yoy, this was more than compensated by a spike in the tanker segment. This ensured a strong operational performance by GE Shipping. TO a large extent, the disruption in the oil movement caused by the embargo on Black Sea movement of oil from Russia has been a key factor in higher tanker prices, benefiting GE Shipping during the latest quarter.

The company has also paid an interim dividend of Rs12.60 per share, which takes the dividend yield to an attractive level. Traditionally, GE Shipping had always been a high dividend paying company. However, the risk at this level is that any turn to a recession in the global market could change the fortunes of the shipping industry and that would negatively impact the fortunes of GE Shipping. For now, that does look like a remote possibility and GE Shipping stock is literally making hay while the sun is shining.