Buy Gujarat Pipavav Port; Target Of Rs 110: ICICI Direct
ICICI Direct is bullish on Gujarat Pipavav Port recommended buy rating on the stock with a target price of Rs 110 in its research report dated November 13, 2020.
Nov 17, 2020 / 11:25 AM IST
ICICI Direct's research report on Gujarat Pipavav Port
Gujarat Pipavav (GPPL) reported a muted set of Q2FY21 numbers. Consolidated revenues de-grew 8% YoY to Rs 183 crore. While container volumes de-grew 25% (transhipment volumes contracted the most, leading to a favourable container mix), bulk volumes, on the other hand, saw 36% growth (mainly due to higher fertiliser volumes). Hence, due to higher handling expenses led by growth in the fertiliser segment, gross margins, EBITDA margins contracted 560 bps, 730 bps to 77.6%, 56.3%, respectively. Absolute EBITDA de-grew 19% to Rs 80 crore. Subsequently, due to lower profit from Pipavav Rail Corp (mainly due to adjustments of prior quarter), lower other income and higher tax rate, PAT de-grew 35% to Rs 50 crore.
On DFC front, GPPL expects the line to be completed in Q4FY21 (electrification being performed on Pipavav rail line, DFC). The management plans to incur Rs 100 crore for the work. Higher utilisation with a favourable product mix remains key to stronger earnings for GPPL. Post DFC, incremental FCF could be further utilised for port expansion (mostly greenfield expansion). We revise our target price to Rs 110 (at FY22E P/E multiple of 17). We maintain BUY rating.
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