Accumulate Gujarat Pipavav; target Rs 66: P Lilladher

“Gujarat Pipavav Port (GPPV) declared results above ours as well as consensus estimates. Owing to 1>higher proportion of reefer cargo, plus 2>increased marine charges aided by currency depreciation, coupled with 3> certain volume (year-end adjustments based on committed and actual volumes) and demurrage write-backs, the quarter saw a sharp 18% sequential increase in revenues. Revenues grew 33% YoY and 18% QoQ to Rs1,159m. Higher revenues led to margin expansion continuing in Q4CY11, as EBITDA margins (adjusted for volume and demurrage write-backs) improved ~200 bps QoQ to 48%. Reported EBITDA margins stood at 50.9% compared to 43.9% in Q4CY10. Also, other income at Rs48m was higher in Q4CY11on Rs21m of sundry write-backs. As a result, PAT stood at Rs270m, a growth of 142% YoY and 104% QoQ.”

“Container volumes remained stable QoQ, clocking 170,380 TEUs, while bulk volumes increased ~15% QoQ to 0.9mt, aided by higher fertilizer volumes during the quarter. A general slowdown in the west coast container market (8-9% growth) has resulted in a slower ~20% YoY growth in Q4CY11 container volumes at GPPV (compared to a 31% full year growth). Also, as GPPV’s exclusivity agreement with Maersk line ends in March 2012, Maersk has decided to start a new service calling at Mundra port which could affect container volume growth at the port. However, the management is currently negotiating longer term (1 year+) contracts, with shipping lines to garner higher volume commitments in order to enhance volume growth visibility at GPPV.”

“Container yard capacity expansion to ~850k TEUs has been completed during the quarter. The company is planning to spend ~Rs10bn in CY12 for a> three Rail Mounted Gantry Cranes for ~Rs500m to handle increased rail container traffic, expected to be commissioned by Q4 CY12 and b> ~Rs500m on fertilizer shed expected to be completed by Q3CY12. We reiterate our positive stance on the stock, given the favourable long-term volume growth prospects, and resultant margin expansion expectations. Based on our DCF-based approach, our SOTP-based target price stands at Rs 66/share. We maintain ‘Accumulate’ on the stock,” says Prabhudas Lilladher research report.

Shares held by Central Governments/State Governments

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.