Investment Rationale
Rich Background of promoters
GPPL is managed by APM Terminals and is part of APM Moller–Maersk Group. It is the largest
container ship operator and supply vessel operator in the world since 1996 and operates in and
around 130 countries. APM Terminals offers the global shipping community a geographically
balanced, integrated Global Port, Terminal and Inland Services Network which includes current
operations in 56 ports and terminals in 37 countries. With such a rich experience, we believe
that the management team is very well equipped and has an expertise in handling of containers.
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Closeness to JNPT will act as a catalyst for rising volumes
Just 152 nautical miles from JNPT in Mumbai (less than 10 hrs distance), Gujarat Pipavav Port
(GPPL) is perfectly located to take advantage of increasing containerization in the country and
an over capacity utilization at JNPT. It is an all-weather port located in the state of Gujarat,
which provides immediate access to a rich hinterland and key markets in northwest India. In
FY11 with handling of around 5% of India’s container cargo, it has emerged as one of the top 5
container ports in India. Other major players in FY11 are Nhava Sheva, Chennai and Adani Port.
Strong (Container) volume will be the revenue driver
Container volume in India has grown with a CAGR of 17% in last 5 years to around 11 mn TEUs.
Due to high intensity of industrial hubs in the western corridor (Gujarat and Maharashtra),
container terminals in western zone handles more than 60% of all India container traffic.
According to international standards, Indian containerization is on the lower side at 68% as
compared to 80% global average.
PRCL can boost EBITDA Margins
The rail connectivity project was undertaken by PRCL (Pipavav Rail Corporation Limited),
promoted by GPPL and the Ministry of Railways for the construction, operation & maintenance
of the 271 km long railway line. In this venture, GPPL is holding 38.8% stake with total
investment `830 mn. GPPL was the first port in India to receive double stacked container trains
in March’06 due to which terminal congestion will be minimum, reduced cost of haulage and
overall transit will be reduced.
Liquid Logistics terminal an added advantage
GGPL has strategic tie ups with three companies namely Aegis Logistics, Gulf Petrochem and IMC
Ltd for import and export of liquid commodities. We believe that setting up of a liquid logistics
facility (at very close proximity to Mumbai which is a gateway for more than 90% of liquid
traffic) will act as a game changer for the company. Since all the major ports are running at
almost full capacity, the best possible alternative to Mumbai seems to be GPPL due to its close
proximity and no other competitor ports (Adani Port) in the is equipped to handle liquid cargo.
Valuation
GPPL has outperformed all the Indian ports and grown phenomenally well and we believe it will
continue to do so, given the close proximity to Mumbai and strong parent profile. We believe
long term potential of the company remains flamboyant as there is an availability of large
waterfront and hinterland.
We have valued GPPL based on SOTP (sum of the parts valuation) method, where the core
business is valued by DCF method and PRCL on book value method. We initiate coverage on
Gujarat Pipavav Port Ltd with BUY rating and a target price of `74 per share valuing the firm on
DCF basis which assumes WACC at 12% and terminal growth rate of 5% from FY16E.
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