Gujarat Pipavav Port Ltd.|Q3CY14 Result Update | Inline with expectation… maintain hold with target price of Rs 151… :: IndiaNivesh

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Gujarat Pipavav Port Ltd (GPPL) reported Q3CY14 which were largely inline with
expectation as Net sales grew by 33% yoy to Rs 1.57 bn led by 23% growth in Bulk
cargo volumes. EBIDTA was ahead of expectation by 4% and stood at Rs 829.2 mn
(up 56% yoy). EBITDA margins were ahead of expectation at 52.8% (vs expectation
of 49.3%) led by lower than expected growth in employee cost (up 2% yoy). Net
profit was inline with expectation at Rs 895 mn, up 103% yoy

GPPL’s reported Net sales of Rs 1.57 bn, up 33% (inline with expectation). Container
volumes grew by 19% yoy in Q3CY14, however volumes were down 4% qoq mainly
due to lower exports on back of monsoon. Bulk cargo volume growth was strong
23% qoq led higher demand from coal and fertilizer. Liquid cargo segment, which
company has started 3 months back, has done volume of 96,695 MT.
EBIDTA grew by 56% yoy to Rs 829 mn (vs our expectation of Rs 794 mn). EBITDA
margins were at 55.5%. Total operating expense grew by 15% yoy to Rs 742 mn.
Employee expense was flat at Rs 114 mn (down 13% qoq).
Further the company has received bonus of Rs 152 mn from associate company,
Pipavav Rail Corporation Ltd. Total other income (including other operating income)
was up 106% yoy to Rs 322 mn. Depreciation expense was lower by 4% qoq to
Rs 164 mn. Net profit was inline with expectation at Rs 895 mn, up 103% yoy (11%
qoq). Net margin improved to 57% from 51.7% in Q2CY14 and 37.4% in Q3CY13.

Concall / Other updates
Company has repaid complete debt of Rs 2933 mn in August 2014 and now its debt
free which is inline with management’s earlier guidance. Fixed assets were largely
flat mainly because company has not done any significant capex during this period.
Management specified that company’s expansion plan is on track and next capex is
lined up for next year which will be financed by ECB of USD 60 mn.
Valuation:
GPPL reported inline performance on sales with healthy growth in bulk volumes.
EBITDA was slightly ahead of expectation which was on back of lower expense
(employee and other expense). Repayment of debt was inline with management’s
earlier guidance which was the key positive which will help company in saving
interest expense. Further the company has planned capex for next year which could
be through ECB. We maintain HOLD rating on the stock with target price of Rs 151.
We had initiated on GPPL with BUY rating and PT of Rs 75 on January 8, 2014 and
subsequently revised upwards our PT to Rs 114. Our then BUY rating was on the
basis of (1) ramp-up in Container Volumes business, (2) better operating leverage,
and (3) unlevered balance sheet. After our PT of Rs 114 was breached, we maintained
HOLD rating with PT “Under Review” (as value from Liquid Farm Tank business was
not added to our PT). With commencement of Liquid Farm Tank business, we have
added (based on our Channel checks) conservatively the business value from this
Liquid Farm Tank business to arrive at Sum-of-the-Parts based valuation
methodology of Rs 151.

LINK
http://www.indianivesh.in/Admin/Upload/635507752831571250_Gujarat%20Pipavav%20Port_Q3CY14%20Result%20Update.pdf