ICICI Direct is bullish on Gujarat Pipavav Port has recommended buy rating on the stock with a target price of Rs 85 in its research report dated June 10, 2020.
ICICI Direct's research report on Gujarat Pipavav Port
Gujarat Pipavav’s (GPPL) Q4FY20 revenues de-grew 10% YoY to Rs 162 crore. Container volume (makes up 70% of revenues) also de-grew 10% but saw a favourable mix (Exim volumes grew 3-4% YoY), leading to a higher realisation of 6000-6200/TEU (vs. 5800-5900/TEU a year ago). EBITDA margins grew 673 bps to 62% (330 bps Ind-AS 116 effect with rest due to lower bulk handling volumes), leading to flat growth in absolute EBITDA at Rs 100 crore. However, due to higher depreciation, interest and lower profit from Pipavav Rail Corp, PAT de-grew 10% to Rs 54 crore. The company announced a final dividend of Rs 3.5 (5.3% yield).
GPPL expects to become DFC compliant by Q4CY20, provide time table bound services to its clients and also attract potential clients from other ports (ex-Gujarat). It is running at ~65% capacity utilisation and is expected to undertake major capex once utilisation reaches 80%. 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 85 (at FY22E P/E multiple of 13) and maintain BUY rating.
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