Buy Gujarat Pipavav; target of Rs 195:ICICIDirect

ICICIDirect's research report on Gujarat PipavavRevenues for Q3FY16 were at | 165.4 crore (vs. estimate of ~| 153 crore), de-growth of 10.3% YoY (up 10.9% QoQ). Revenues in the earlier quarter were hit by disruption following bad weather and loss of certain lines. However, in the quarter, a new liner and an additional rail service were added. An additional amount of | 4 crore was added to the topline due to write-back volume incentives Container volume for the quarter was at 178000 TEUs vs. 146000 TEUs in Q2FY16 and 196000 TEUs in Q4CY14 (comparable period) Lower coal volumes adversely impacted bulk volumes in the quarter, which was at 440000 MT vs. 628000 MT in Q2FY16 and 1210000 MT in Q4CY14. Volumes in liquid cargo continue to get ramped up faster with sequential growth of 16%. Volumes were at 189000 MT vs. 163000 MT in Q2FY16, 80000 MT in Q4CY14. The port also handled seven calls with volumes of 4500 cars through its Ro-Ro operations EBITDA for the quarter remained stagnant YoY (up 31% QoQ) at | 100 crore. Write-back of dredging expenses to the extent of | 1 crore, coupled with lower operating expenses due to subdued bulk volumes, EBITDA margins (though not comparable) were at elevated levels. Reported EBITDA margins were at 60.5% vs. 54.5% in Q4CY14, 51.3% in Q2FY16. EBITDA margins adjusting for exceptional revenue and costs were at 58.9% PAT sequentially remained dormant at | 53 crore vs. | 89 crore in Q4CY14. Q2FY16 PAT included exceptional gain due to write-back of higher depreciation & dredging expenses of | 60.4 crore Volume growth from the liquid cargo business (albeit lower base) continues to remain upbeat. Additionally, roll-in roll-out (RO-RO) volumes that commenced from Q2FY16 were encouraging. Debt free status, coupled with newer capacities and prudent utilisation of funds, assures the management focus on core business. The recent correction in the stock price due to softness in earnings is short lived and gives an opportunity to BUY with a target price of | 195. 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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