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Gujarat Pipavav Port (GPPV)
Infrastructure
Continues strong growth path on market share gain and higher realizations.
GPPL reported strong 1QCY11 revenue growth of 54% yoy led by volume growth
(30%+ in both containers and bulk) and increased realizations (18-20% yoy). The
results were further boosted by strong EBITDA margin expansion to 46% (versus our
estimates of 42%) leading to a net PAT of Rs60 mn, about 13.7% ahead of estimates.
Reiterate BUY with a revised target price of Rs71/share (from Rs68/share earlier).
Strong results led by volume growth, higher realization levels and margin expansion.
Revenues: GPPL reported a strong revenue growth of 54% yoy in 1QCY11 (to Rs831 mn) led
by a strong 30%+ growth in volumes (container and bulk) as well as higher average realizations
for the quarter (up 18-20% yoy).
EBITDA margin: GPPL reported EBITDA margin of 46% in 1QFY11 versus 32.4% in 1QCY10
and our estimate of 42%. The strong margin expansion was primarily on account of operating
leverage (due to strong volume growth) and absence of PRCL related provisions.
Positive PAT of Rs60 mn: GPPL reported a net PAT of Rs60 mn in 1QCY11, about 13.7%
higher than our estimate, versus a loss of Rs318 mn reported last year.
Both containers as well as bulk record strong volume and realization growth
Container business: Container volumes at the port recorded a strong volume growth of 29%
yoy led by addition of two new container services. The 29% growth was versus a 5.5% growth
in container volumes handled on the west coast of India—implying a gain in total market share.
The management also cited that average realization levels in containers has increase by about
24% yoy primarily on reduction/ removal of earlier tariff rebates.
Bulk business: GPPL reported a 33% growth in bulk volumes in 1QCY11. The loss of Essar’s
iron ore pellet volumes was partly offset by addition of two new customers in the bulk business
– for Rock Phosphate and Salt. The management also cited 18% increase in average bulk
realizations on favourable commodity mix.
Revise estimates and target price to Rs71/share; reiterate BUY
We have marginally revised our estimates to Rs1.5 and Rs2.8 and correspondingly revised our
SOTP-based target price to Rs71/share (from Rs68). We reiterate our BUY rating based on (1) likely
strong near-term earnings, (2) attractive asset profile and (3) growing trade volumes amidst
capacity constraints.
Strong results led by volume growth, higher-than-expected margin expansion
Strong revenues on the back of volume and realization growth. GPPL reported
1QCY11 revenues of Rs831 mn, up 54% yoy (marginally below our estimate of Rs850
mn). The revenue growth was led by a strong 30%+ growth in volumes (container and
bulk) as well as higher average realizations for the quarter (up 18-20% yoy).
EBITDA margin expansion stronger than expected. GPPL reported EBITDA margin of
46% in 1QFY11 versus 32.4% in 1QCY10 and our estimate of 42%. The strong margin
expansion was primarily on account of operating leverage (due to strong volume growth)
and absence of PRCL related provisions (would exceed minimum guaranteed volumes of 3
MT to PRCL in FY2011).
Positive PAT of Rs60 mn; 13.7% ahead of estimates. GPPL reported a net PAT of Rs60
mn in 1QCY11, about 13.7% higher than our estimate of Rs53 mn, versus a loss of
Rs318 mn reported last year and a positive PAT of Rs111 mn in 4QCY10. The
management also cited that the company had received a one-time favourable write back
of Rs32 mn in 4QCY10 (accounted for in financial cost). Furthermore, GPPL also incurred
a Rs10 mn exchange-related loss due to repayment of loans. Adjusted for these GPPL’s
net PAT is likely to have been similar to 4QFY10 levels.
Both containers as well as bulk record strong volume and realization growth
Container business: Strong volume growth leads to increased market share; sharp
increase in realization levels as well
Container volumes at the port recorded a strong volume growth of 29% yoy to 137,000
TEUs from 106,000 TEUs in 1QCY10. These volumes were at 96% of 4QCY10 volumes
which is seasonally the strongest quarter of the year – management cited that typically
1QCY11 is the second weakest quarter during the year. The container volume growth was
led by addition of two new container services viz. APAK (MSC) and Hercules Service (NYK)
during the quarter. The 29% growth was versus a 5.5% growth in container volumes
handled on the west coast of India in 1QCY11 – implying a gain in total market share.
The management also cited that average realization levels in containers has increase by
about 24% yoy primarily on reduction/ removal of earlier tariff rebates.
Bulk business: Strong growth; loss of Essar’s iron ore pellet business partly made up
by 2 new product categories
GPPL reported a 33% growth in bulk volumes in 1QCY11 to 0.65 mn tons (versus 0.49 mn
tons in 1QCY10 and 0.77 mn tons in 4QCY10). The loss of Essar’s iron ore pellet volumes
(Essar has its own dedicated port at Hazira) was partly offset by addition of two new
customers in the bulk business – for Rock Phosphate and Salt. The management also cited
18% increase in average bulk realizations on favourable commodity mix.
Port has significantly outperformed the sector in terms of volume growth
In 1QCY11, Pipavav port recorded a total cargo growth of 30%. This is versus marginal
growth of just 3% for major ports in India. In the container segment, Pipavav port recorded
growth of 29% versus a yoy growth of 5.4% in the average container volumes handled at
major ports.
Full-impact of liquid cargo agreements to kick in from 2012E
GPPL has signed deals with Gulf Petrochemical and Aegis Logistics allowing the companies
to eventually build an oil terminal at Pipavav port. Apart from revenues related to cargo
handling at port, Gulf Petrochemicals and Aegis would also pay lease rentals to GPPL for the
occupied land (for tankage farms). GPPL management cited that the company is actively
seeking/ is in discussions with several other firms to sign similar deals on the liquid cargo
front. This will help increase the utilization of the existing 65 mts berth available for liquid
and LPG operations which is presently under-utilized. Of the total 20 mn tons of liquid cargo
capacity Aegis and Gulf Petrochemicals agreements would utilize about 1.2 mn tons.
The lease rentals from these agreements would start on an immediate basis. However the
full-impact of these agreements would kick in only once tank farms are set up; expected in
the last quarter of CY2011 or first quarter of CY2012.
The company also reported a small amount of liquid cargo volumes in 1QCY11 (about
30,000 tons) led by LPG volumes from Aegis. Note that this is independent of the
agreement signed with the company.
Revise estimates and target price to Rs71/share; reiterate BUY
We have marginally revised our estimates to Rs1.5 and Rs2.8 for CY2011E and CY2012E
based on slightly higher volume and margin assumptions. We have correspondingly revised
our target price to Rs71/share (from Rs68/share) comprised of (1) Rs63/share for the core
port business (FCFE valuation), (2) Rs2.6/share for its with Pipavav Rail Corporation Ltd (PRCL,
1.5X book value) and (3) Rs5.3 from 50% of the calculated depreciated replacement value
receivable at the end of the concession period.
We reiterate our BUY rating on the company is based on (1) attractive asset profile, (2)
strong likely near-term earnings growth led by volume growth, margin expansion and lower
interest costs, (3) the addition of several new shipping lines in the past few months shoresup
confidence in achieving volume growth estimates, (4) long-term potential to add capacity
at Pipavav port led by availability of a large waterfront, and (5) ability to benefit from
expected growth in Indian trade volumes where capacities are constrained to keep pace with
volume growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Gujarat Pipavav Port (GPPV)
Infrastructure
Continues strong growth path on market share gain and higher realizations.
GPPL reported strong 1QCY11 revenue growth of 54% yoy led by volume growth
(30%+ in both containers and bulk) and increased realizations (18-20% yoy). The
results were further boosted by strong EBITDA margin expansion to 46% (versus our
estimates of 42%) leading to a net PAT of Rs60 mn, about 13.7% ahead of estimates.
Reiterate BUY with a revised target price of Rs71/share (from Rs68/share earlier).
Strong results led by volume growth, higher realization levels and margin expansion.
Revenues: GPPL reported a strong revenue growth of 54% yoy in 1QCY11 (to Rs831 mn) led
by a strong 30%+ growth in volumes (container and bulk) as well as higher average realizations
for the quarter (up 18-20% yoy).
EBITDA margin: GPPL reported EBITDA margin of 46% in 1QFY11 versus 32.4% in 1QCY10
and our estimate of 42%. The strong margin expansion was primarily on account of operating
leverage (due to strong volume growth) and absence of PRCL related provisions.
Positive PAT of Rs60 mn: GPPL reported a net PAT of Rs60 mn in 1QCY11, about 13.7%
higher than our estimate, versus a loss of Rs318 mn reported last year.
Both containers as well as bulk record strong volume and realization growth
Container business: Container volumes at the port recorded a strong volume growth of 29%
yoy led by addition of two new container services. The 29% growth was versus a 5.5% growth
in container volumes handled on the west coast of India—implying a gain in total market share.
The management also cited that average realization levels in containers has increase by about
24% yoy primarily on reduction/ removal of earlier tariff rebates.
Bulk business: GPPL reported a 33% growth in bulk volumes in 1QCY11. The loss of Essar’s
iron ore pellet volumes was partly offset by addition of two new customers in the bulk business
– for Rock Phosphate and Salt. The management also cited 18% increase in average bulk
realizations on favourable commodity mix.
Revise estimates and target price to Rs71/share; reiterate BUY
We have marginally revised our estimates to Rs1.5 and Rs2.8 and correspondingly revised our
SOTP-based target price to Rs71/share (from Rs68). We reiterate our BUY rating based on (1) likely
strong near-term earnings, (2) attractive asset profile and (3) growing trade volumes amidst
capacity constraints.
Strong results led by volume growth, higher-than-expected margin expansion
Strong revenues on the back of volume and realization growth. GPPL reported
1QCY11 revenues of Rs831 mn, up 54% yoy (marginally below our estimate of Rs850
mn). The revenue growth was led by a strong 30%+ growth in volumes (container and
bulk) as well as higher average realizations for the quarter (up 18-20% yoy).
EBITDA margin expansion stronger than expected. GPPL reported EBITDA margin of
46% in 1QFY11 versus 32.4% in 1QCY10 and our estimate of 42%. The strong margin
expansion was primarily on account of operating leverage (due to strong volume growth)
and absence of PRCL related provisions (would exceed minimum guaranteed volumes of 3
MT to PRCL in FY2011).
Positive PAT of Rs60 mn; 13.7% ahead of estimates. GPPL reported a net PAT of Rs60
mn in 1QCY11, about 13.7% higher than our estimate of Rs53 mn, versus a loss of
Rs318 mn reported last year and a positive PAT of Rs111 mn in 4QCY10. The
management also cited that the company had received a one-time favourable write back
of Rs32 mn in 4QCY10 (accounted for in financial cost). Furthermore, GPPL also incurred
a Rs10 mn exchange-related loss due to repayment of loans. Adjusted for these GPPL’s
net PAT is likely to have been similar to 4QFY10 levels.
Both containers as well as bulk record strong volume and realization growth
Container business: Strong volume growth leads to increased market share; sharp
increase in realization levels as well
Container volumes at the port recorded a strong volume growth of 29% yoy to 137,000
TEUs from 106,000 TEUs in 1QCY10. These volumes were at 96% of 4QCY10 volumes
which is seasonally the strongest quarter of the year – management cited that typically
1QCY11 is the second weakest quarter during the year. The container volume growth was
led by addition of two new container services viz. APAK (MSC) and Hercules Service (NYK)
during the quarter. The 29% growth was versus a 5.5% growth in container volumes
handled on the west coast of India in 1QCY11 – implying a gain in total market share.
The management also cited that average realization levels in containers has increase by
about 24% yoy primarily on reduction/ removal of earlier tariff rebates.
Bulk business: Strong growth; loss of Essar’s iron ore pellet business partly made up
by 2 new product categories
GPPL reported a 33% growth in bulk volumes in 1QCY11 to 0.65 mn tons (versus 0.49 mn
tons in 1QCY10 and 0.77 mn tons in 4QCY10). The loss of Essar’s iron ore pellet volumes
(Essar has its own dedicated port at Hazira) was partly offset by addition of two new
customers in the bulk business – for Rock Phosphate and Salt. The management also cited
18% increase in average bulk realizations on favourable commodity mix.
Port has significantly outperformed the sector in terms of volume growth
In 1QCY11, Pipavav port recorded a total cargo growth of 30%. This is versus marginal
growth of just 3% for major ports in India. In the container segment, Pipavav port recorded
growth of 29% versus a yoy growth of 5.4% in the average container volumes handled at
major ports.
Full-impact of liquid cargo agreements to kick in from 2012E
GPPL has signed deals with Gulf Petrochemical and Aegis Logistics allowing the companies
to eventually build an oil terminal at Pipavav port. Apart from revenues related to cargo
handling at port, Gulf Petrochemicals and Aegis would also pay lease rentals to GPPL for the
occupied land (for tankage farms). GPPL management cited that the company is actively
seeking/ is in discussions with several other firms to sign similar deals on the liquid cargo
front. This will help increase the utilization of the existing 65 mts berth available for liquid
and LPG operations which is presently under-utilized. Of the total 20 mn tons of liquid cargo
capacity Aegis and Gulf Petrochemicals agreements would utilize about 1.2 mn tons.
The lease rentals from these agreements would start on an immediate basis. However the
full-impact of these agreements would kick in only once tank farms are set up; expected in
the last quarter of CY2011 or first quarter of CY2012.
The company also reported a small amount of liquid cargo volumes in 1QCY11 (about
30,000 tons) led by LPG volumes from Aegis. Note that this is independent of the
agreement signed with the company.
Revise estimates and target price to Rs71/share; reiterate BUY
We have marginally revised our estimates to Rs1.5 and Rs2.8 for CY2011E and CY2012E
based on slightly higher volume and margin assumptions. We have correspondingly revised
our target price to Rs71/share (from Rs68/share) comprised of (1) Rs63/share for the core
port business (FCFE valuation), (2) Rs2.6/share for its with Pipavav Rail Corporation Ltd (PRCL,
1.5X book value) and (3) Rs5.3 from 50% of the calculated depreciated replacement value
receivable at the end of the concession period.
We reiterate our BUY rating on the company is based on (1) attractive asset profile, (2)
strong likely near-term earnings growth led by volume growth, margin expansion and lower
interest costs, (3) the addition of several new shipping lines in the past few months shoresup
confidence in achieving volume growth estimates, (4) long-term potential to add capacity
at Pipavav port led by availability of a large waterfront, and (5) ability to benefit from
expected growth in Indian trade volumes where capacities are constrained to keep pace with
volume growth.
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