Motilal Oswal's report on Gujarat Pipavav PortThe Far East Subcontinent 3 (FE3) service operated by multiple carriers – Maersk, CMA, APL and Orient Overseas Container Line (OOCL) – has shifted port of calling from Pipavav to Mundra. Total annual container volume of the service is estimated at 0.07-0.08m TEUs. The shift is on account of non-fulfillment of a request for an alternate window/schedule for the service at Pipavav, owing to Pipavav’s commitment to others. The shift is usual in commercial parlance and various services keep hopping between various terminals at JNPT.In the past too, GPPV had witnessed a shift of service by Maersk to Mundra, which was offset by shift of another service from JNPT to Pipavav. Given that the total volume is constituted by multiple carriers, the shift of service may not lead to shift of all carriers to Mundra and total volume loss could be minimal. In addition, if the cargo handled in such service is catering to the hinterland of Pipavav, the shift is unlikely, as overall logistics cost for the end consumer will go up. While the exact quantum of loss in container volume would be known only over the next 1-2 quarters, the impact is unlikely to be meaningful in the management’s opinion."We expect GPPV to report earnings of INR4.6b in FY16 (up 29%) and INR5.6b in FY17 (up 24%). The stock trades at 16.4x FY17E EPS and 3.3x FY17E BV. Our target price is INR257 (DCF value of INR231/share for port business plus INR25/share for Pipavav Rail Corp [15x FY17E EPS]), indicating 37% upside. We reiterate BUY, given the sizable growth option, good quality management, and high FCF/dividend possibility", says Motilal Oswal research report.For all recommendations, click here 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.
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