SEAMEC Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Strong quarter, growth momentum expected to continue: Revenue and EBITDA grew on higher deployment days, new vessel additions, and improving charter rates. Management targets a 15%-20% CAGR and is "reasonably sure" of achieving it.
• Fleet transformation underway: The sale of loss-making Seamec Nidhi and acquisitions of two OSVs plus the large MSV NUSANTARA reshape the fleet toward profitable, EPS-accretive assets.
• Margins seen holding firm: FY24 EBITDA margin improved; management expects a similar or better level (~31%) in FY25, supported by a strong market, though the lower-margin OSV business will add volume.
• Consolidated profitability set to improve: The gap between standalone and consolidated net profit, widened by inter-company charges and Seamec Nidhi losses, should narrow "remarkably" as international operations improve and the Nidhi drag is removed.
• What to watch next quarter: The deployment of newly acquired OSVs Seamec Diamond and Seamec Pearl with ONGC, the seasonal monsoon dip in Q1/Q2, and progress on the targeted East Coast opportunity.

Fleet & Asset Strategy

• Acquisitions adding capacity: Seamec Diamond (OSV) was acquired in January 2024, and Seamec Pearl (OSV) is expected by mid-June 2024. Both are anticipated to deploy with ONGC on three-year charters at USD 8,750 per day.
• NUSANTARA is the next growth catalyst: A memorandum of agreement was signed for the MSV NPP NUSANTARA, with delivery expected mid-September 2025. The vessel comes with a five-year contract in hand and is expected to be EPS-accretive from the acquisition date.
• Loss-making asset exited: Seamec Nidhi, which was not yielding profits, was sold for USD 1.05 crore and delivered in April 2024. Management took the call to cut losses and focus on the profitable MSV business, which will reduce the drag on consolidated financials from FY25 onward.
• No fixed asset roadmap: Management declined to provide a detailed asset consolidation roadmap, stating there is no such plan, but the aim is to consolidate vessel assets under Seamec over the next few years.

Management: "NUSANTARA is going to be acquired sometime in mid-September next year, 2025. And that vessel has got a contract in hand currently for five years. So, from the date of acquisition itself when this takes place again, this capex will also be EPS accretive only."

Financial Performance & Profitability

• Revenue and EBITDA drivers: Top-line growth came from the addition of DSV Seamec Swordfish and Seamec Glorious Barge, an increase in EPC contracts, higher deployment days (521 vs 421 YoY), and an increasing day rate for Seamec Swordfish. EBITDA growth was led by these new additions, higher utilisation, and improved charter hire rates.
• Consolidated profit dip is temporary: The decline in consolidated profitability was driven by three identifiable items: INR 9 crores in inter-company interest from an overseas subsidiary, INR 6 crores in one-time expenses on the Seamec Nidhi contract closure, and INR 8 crores in depreciation and financial expenses in overseas entities.
• All six vessels deployed: Full fleet deployment during the quarter underpinned the strong financial performance.

Naveen Mohta: "Going forward, the difference between the standalone and consolidated will narrow as we improve our international operations. And since we have cut down heavily on this Seamec Nidhi, you will see a remarkable improvement in the coming years."

Margin Outlook & Mix Shift

• Current margin expectation: Management views a 40% to 45% margin range as healthy for the business. The OSV segment will deliver lower margins than the MSV business, so a 40% margin is the current expectation going forward.
• FY25 margin seen stable to better: Margins are expected to be "more or less the same" as FY24 (~31%) and "maybe get better" because the market is expected to remain strong.
• OSV business is a volume play: OSVs provide lower revenue and profitability compared to MSVs but offer significant volume business. They are described as a "low-lying foods kind of thing" that adds scale.

Naveen Mohta: "Yes, it will be more or less the same only and maybe get better itself because as I told market is going to be firm -- remain strong. So definitely this will be the case."

Demand Environment & Charter Rates

• Market strength expected to persist: Charter rates are firming up, and the trend is expected to continue for the next two to three years, supporting both revenue growth and margin stability.
• Seasonal pattern intact: Three vessels operate on non-monsoon season contracts, meaning Q2 and part of Q1 will see a seasonal decline in deployment, with an uptrend resuming from Q3 onward. The dry dock for Seamec Princess is planned during the non-working monsoon period to avoid compromising deployment days.
• East Coast opportunity under consideration: An exciting opportunity on the East Coast is being targeted, which could yield a three-year contract if it materialises. It remains under consideration.

Capex, Debt & International Expansion

• Capex plan of INR 600-700 crores over three years: The plan envisions INR 200-300 crores in FY25-26 and INR 300-400 crores in FY26-27. Capex will be directed toward either replacement or new additions, depending on market opportunity and DG shipping guidelines.
• Debt retained for growth: Loan tenures are 5 to 7 years, and the company is not repaying debt because it is targeting further capex. No specific capex is earmarked exclusively for OSV or DSV; the focus is on EPS-accretive opportunities.
• London office to access North Sea market: A loan of approximately INR 180 crores was given to the UK subsidiary, and a property has been acquired to open a global office in London. The office will help Seamec connect with E&P companies operating in the North Sea and other overseas areas.

Guidance & Commitments

Key Metrics