Gujarat Pipavav Port SELL -- HDFC Sec

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Strong volumes, rich valuations
Gujarat Pipavav Port’s (GPPV) 3QCY14 APAT of Rs
895mn was in line with our est. of Rs 900mn owing to
higher other income through interim dividend of Rs
152mn from Pipavav Railway Corporation (PRCL,
along expected lines). Container volumes grew 19%
YoY to 0.19mn TEUs owing to two new services and
upsizing of existing vessels with bulk volumes
increasing 3% YoY owing to higher coal and fertilizer
cargo. PRCL also continues to exhibit strong
operating performance in FY14 with 24% YoY
revenue growth to Rs 2.2bn and 74% YoY PAT growth
to Rs 0.8bn.
GPPV has retired the existing Rs 3bn rupee debt
during the quarter with existing cash balance of Rs
3.3bn as of Jun-14. Also, the ongoing capex for
expansion of Rs 4.6bn will be funded through an ECB
loan of USD 60mn (50% lower interest costs). We
revise our CY15E SOTP value for GPPV to Rs 122/sh
(Rs 119/sh earlier) factoring in improved operational
performance from PRCL over FY15-17E. However, we
retain our SELL rating on the stock and believe that
with RoEs expected to peak at 21.7% from CY16E
onwards, current valuations at 2.5x CY16E P/B and
13.2x CY16E EV/EBITDA are unjustifiable.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3009568