Moneycontrol
Oct 18, 2016 03:29 PM IST IST | Source: Moneycontrol.com

Gujarat Pipavav dips 3% as Credit Suisse downgrades, cuts target

Credit Suisse has downgraded Gujarat Pipavav Port to underperform and also slashed target price to Rs 155 per share from Rs 195, citing lacklustre container trade data in Q2 and increase in risks to business.


Moneycontrol Bureau


Credit Suisse has downgraded Gujarat Pipavav Port to underperform and also slashed target price to Rs 155 per share from Rs 195, citing lacklustre container trade data in Q2 and increase in risks to business.


The brokerage house has reduced earnings per share estimates for FY17/FY18/FY19 by 8/14/16 percent, respectively as it cut volume and margin estimates for recent developments.


Container traffic at major ports in Q2 remained weak with a flat number on a YoY basis. Same is the case with rail container data also which is weaker sequentially (from Q1) in YoY growth terms. This data set suggests continued weakness in trade.


According to the brokerage house, Gujarat Pipavav may have lost ground on two counts - Hanjin bankruptcy (part FIX and WIN service alliance) and Hyundai CIX service drop. Both these lines may need to be reorganised and create volume uncertainty at Pipavav.


The company has around 13-14 lines calling every week, doing volumes of 14,000-15,000 per week.


Cargo can come back to the port even post line drop, however net impact may still be negative as competing ports can benefit, says Credit Suisse, adding container terminal is a winner-takes-all business and Gujarat Pipavav as a smaller asset needs to assert its competitive positioning, particularly when the sectoral tide is completely absent.


Better-than-expected volumes and margins are key upside risk, it feels.

At 11:16 hours IST, the scrip of Gujarat Pipavav Port was quoting at Rs 169.65, down Rs 4.20, or 2.42 percent on the BSE.

Posted by Sunil Shankar Matkar

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