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Gujarat Pipavav Port Ltd (GPPL) has the concession to operate and develop
India’s maiden private Greenfield port thru 2028. APM Terminals, one of the
largest container terminal operators globally, is a 43% shareholder in GPPL.
According to management, the all-weather deep draft port at Pipavav in southern
Gujarat is strategically located to serve the north-western hinterland which
accounts for over 55% of India’s cargo. The port offers broad gauge rail
connectivity and was the first to receive double stacked container trains in the
country (in Mar-2006). GPPL’s revenues rose ~25% in CY10 and 60% in
1HCY11 driven by container & bulk cargo traffic and pick-up in realizations.
1HCY11 EBITDA margins rose 690bps to 43.2% driven by topline growth and
improving capacity utilization at the port.
Scope to scale up: Currently Pipavav port has an annual container capacity of
0.75mTEUs (0.27mTEUs handled in 1HCY11); dry bulk capacity of 5MTPA
(2MMT handled in 1HCY11) and liquid cargo berth of 2MTPA capacity (under
utilized). As per mgmt the first phase of expansion would increase container
capacity to 1.5mTEU and bulk capacity to 20MTPA, incurring ball-park capex
of ~Rs7bn over 18-24months from ground-breaking. As per company capex
requirements can be met via debt (1HCY11 net-D/E of 0.8x).
Cargo visibility: IPPs have signed MoUs for coal handling via Pipavav port for
3.6GW projects. The company says these plants are slated to be operational in a
phase-wise manner beyond 2014 and would require ~12MTPA coal. The port is
served by shipping lines on major trade routes and competes with (and derives
synergies from) JNPT, India’s largest container port located 152 nautical miles
away from Pipavav.
Consensus valuation: GPPL is trading at 13x consensus CY12 EV/EBITDA,
vs. 12x FY13E (Mar year-end) for MPSEZ. Consensus estimates imply CY10-
12 revenue CAGR of 35.4% and EBITDA CAGR of 46.4%.
GPPL has outperformed the Sensex (by 21% over last 6 months) and listed
port peers in India.
Key takeaways from the meeting
Brief company overview
Gujarat Pipavav Port Ltd (GPPL) has the concession from Gujarat Maritime Board
(GMB) to build, own and operate Pipavav Port thru 2028. The 30-year concession
was originally won by SKIL (privately held) in 1998 and was the first green-field
PPP development in the port sector in India. APM Terminals hold a 43.01% stake in
GPPL and is the largest shareholder. It belongs to the AP Moller Maersk Group
which ranks among the largest global players in operating container terminals (APM
Terminals) and runs the world's largest container shipping line (Maersk). APM
Terminals has a global network of 54 operating facilities spread over 30+ countries.
In India, APM Terminals also operates a 1.5mTEU container terminal (Gateway
Terminals, 75% stake held by APM and balance by CONCOR) in JNPT at Nhava
Sheva, Mumbai. As per GPPL, it is currently handling ~1.9m TEU, operating well
above rated capacity, which GPPL believes is because of the efficiency of its
operations. Pipavav Port was listed on BSE/NSE in Sep-2010 and raised ~Rs5bn
equity.
Overview of Pipavav Port
Pipavav is an all-weather port located ~152 nautical miles from Nhava Sheva
(Mumbai) in the Saurashtra belt in Southern Gujarat. Its location affords the benefit
of a natural breakwater. The hinterland served by the port includes Gujarat,
Rajasthan, Delhi/NCR and Punjab.
According to management the port has 2 bulk and general cargo berths, 1
multipurpose berth, 1 container berth and 1 liquid cargo berth. The berths have a total
quay length of ~1140m.
The dry bulk and break bulk capacity of the port is ~5MTPA currently. It handles
coal, cement, clinker, fertilizer, steel, iron-ore etc. The port also handles specialized
project cargo. Bulk volume handled in 1HCY11was ~2MMT (up 45.7% YoY) [see
Table 1 for quarterly cargo volume and growth trends]. The bulk handling berths
have a draft of 13m.
The capacity of container berth with the waterfront is ~1.3mn TEU. The container
yard area developed so far allows for container handling capacity of 750,000TEU’s.
According to management, this will be increased to 850,000TEU’s by end-CY11.
The port handled ~271,000TEUs in 1HCY11 (up 40% YoY) [see table 1]. The
container berth has a draft of ~14.5m and the port is capable of handling Post-
Panamax vessels up to 8000-9000TEUs.
Pipavav has a liquid cargo berth (11.5m draft) with a capacity of 2MTPA. According
to management GPPL has tie ups with 3 companies namely Aegis Logistics, Gulf
Petrochem and IMC Ltd for import and export of liquid commodities. The berth is
marginally utilized as of now.
The rail connectivity project was undertaken by Pipavav Rail Corporation Limited
(PRCL), promoted by Port Pipavav and the Ministry of Railways. GPPL has an
equity stake of 38.8% in PRCL. The port can handle incoming and outgoing trains
simultaneously, with six railway sidings to support loading and off loading. As per
management the turnaround time is ~2-3hours with a potential for the port to handle
up to 22 trains in a day (~4.5 rakes handled per day in 1HCY11). Pipavav was the
first port to receive double stacked container trains in Mar-2006. According to
management in a single stack rake it is possible to handle ~90TEUs and double that
in a double stacked train. As per company, Pipavav has an advantage over Mundra
Port in two respects- (a) The latter has to share the routes with Kandla leading to
congestion; (b) More rail passenger movement on Mundra rail routes vs. Pipavav. In
GPPL's view, Indian Railways has the following priority order for traffic- passenger
(highest), followed by foodgrains, fertilizer, coal and finally container (lowest).
Management gave us a thumb rule for port capex- a 300-350m quay length would
require ~Rs3.5-4bn capex assuming evacuation infrastructure is in place and
excluding dredging cost. For 1140m quay length implied capex @Rs3.5bn for 300m
quay length and stated dredging capex incurred so far (~Rs4-5bn) at Pipavav, brings
us close to 1HCY11 gross block of Rs17.1bn (see table 4 for quarterly balance
sheet).
Growth outlook and scalability potential at Pipavav
According to management, the advantages of location, connectivity and efficiency of
operations has made Pipavav the fastest growing container port in the country.
Shipping lines on major trade routes visit the port. The existing rail n/w offers
scalability potential comparable to Nhava Sheva. Implied realization (revenue/cargo
volume) at Pipavav port (see table 1, Rs322/MT in 1HCY11) is comparable to
MPSEZ.
As per company Phase-I of expansion plan at Pipavav would increase bulk
capacity to 20MTPA (from 5MTPA currently) and take container handling
potential capacity to 1.5mTEU from 1.3mTEU currently. This would entail a
ball-park capex in the range of ~Rs7bn and the plan would take ~18-24months from
ground breaking (post financial closure).
According to management, GPPL has signed MoUs with IPP developers (for
3.6GW) who will route coal through Pipavav Port. The projects include Videocon’s
2x600MW project (due in 2014 as per company). Other pipeline projects are by the
following companies- Torrent Power (2x600MW), Sintex (600MW), and Patel
Engineering (600MW). As per company, the projects would need coal of ~12MTPA
and would enter into take-or-pay contracts providing clear visibility on bulk cargo.
Currently APM Terminals is bidding alone for new port concessions in India,
however the possibility of bidding via GPPL in future cannot be ruled out according
to them.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Gujarat Pipavav Port Ltd (GPPL) has the concession to operate and develop
India’s maiden private Greenfield port thru 2028. APM Terminals, one of the
largest container terminal operators globally, is a 43% shareholder in GPPL.
According to management, the all-weather deep draft port at Pipavav in southern
Gujarat is strategically located to serve the north-western hinterland which
accounts for over 55% of India’s cargo. The port offers broad gauge rail
connectivity and was the first to receive double stacked container trains in the
country (in Mar-2006). GPPL’s revenues rose ~25% in CY10 and 60% in
1HCY11 driven by container & bulk cargo traffic and pick-up in realizations.
1HCY11 EBITDA margins rose 690bps to 43.2% driven by topline growth and
improving capacity utilization at the port.
Scope to scale up: Currently Pipavav port has an annual container capacity of
0.75mTEUs (0.27mTEUs handled in 1HCY11); dry bulk capacity of 5MTPA
(2MMT handled in 1HCY11) and liquid cargo berth of 2MTPA capacity (under
utilized). As per mgmt the first phase of expansion would increase container
capacity to 1.5mTEU and bulk capacity to 20MTPA, incurring ball-park capex
of ~Rs7bn over 18-24months from ground-breaking. As per company capex
requirements can be met via debt (1HCY11 net-D/E of 0.8x).
Cargo visibility: IPPs have signed MoUs for coal handling via Pipavav port for
3.6GW projects. The company says these plants are slated to be operational in a
phase-wise manner beyond 2014 and would require ~12MTPA coal. The port is
served by shipping lines on major trade routes and competes with (and derives
synergies from) JNPT, India’s largest container port located 152 nautical miles
away from Pipavav.
Consensus valuation: GPPL is trading at 13x consensus CY12 EV/EBITDA,
vs. 12x FY13E (Mar year-end) for MPSEZ. Consensus estimates imply CY10-
12 revenue CAGR of 35.4% and EBITDA CAGR of 46.4%.
GPPL has outperformed the Sensex (by 21% over last 6 months) and listed
port peers in India.
Key takeaways from the meeting
Brief company overview
Gujarat Pipavav Port Ltd (GPPL) has the concession from Gujarat Maritime Board
(GMB) to build, own and operate Pipavav Port thru 2028. The 30-year concession
was originally won by SKIL (privately held) in 1998 and was the first green-field
PPP development in the port sector in India. APM Terminals hold a 43.01% stake in
GPPL and is the largest shareholder. It belongs to the AP Moller Maersk Group
which ranks among the largest global players in operating container terminals (APM
Terminals) and runs the world's largest container shipping line (Maersk). APM
Terminals has a global network of 54 operating facilities spread over 30+ countries.
In India, APM Terminals also operates a 1.5mTEU container terminal (Gateway
Terminals, 75% stake held by APM and balance by CONCOR) in JNPT at Nhava
Sheva, Mumbai. As per GPPL, it is currently handling ~1.9m TEU, operating well
above rated capacity, which GPPL believes is because of the efficiency of its
operations. Pipavav Port was listed on BSE/NSE in Sep-2010 and raised ~Rs5bn
equity.
Overview of Pipavav Port
Pipavav is an all-weather port located ~152 nautical miles from Nhava Sheva
(Mumbai) in the Saurashtra belt in Southern Gujarat. Its location affords the benefit
of a natural breakwater. The hinterland served by the port includes Gujarat,
Rajasthan, Delhi/NCR and Punjab.
According to management the port has 2 bulk and general cargo berths, 1
multipurpose berth, 1 container berth and 1 liquid cargo berth. The berths have a total
quay length of ~1140m.
The dry bulk and break bulk capacity of the port is ~5MTPA currently. It handles
coal, cement, clinker, fertilizer, steel, iron-ore etc. The port also handles specialized
project cargo. Bulk volume handled in 1HCY11was ~2MMT (up 45.7% YoY) [see
Table 1 for quarterly cargo volume and growth trends]. The bulk handling berths
have a draft of 13m.
The capacity of container berth with the waterfront is ~1.3mn TEU. The container
yard area developed so far allows for container handling capacity of 750,000TEU’s.
According to management, this will be increased to 850,000TEU’s by end-CY11.
The port handled ~271,000TEUs in 1HCY11 (up 40% YoY) [see table 1]. The
container berth has a draft of ~14.5m and the port is capable of handling Post-
Panamax vessels up to 8000-9000TEUs.
Pipavav has a liquid cargo berth (11.5m draft) with a capacity of 2MTPA. According
to management GPPL has tie ups with 3 companies namely Aegis Logistics, Gulf
Petrochem and IMC Ltd for import and export of liquid commodities. The berth is
marginally utilized as of now.
The rail connectivity project was undertaken by Pipavav Rail Corporation Limited
(PRCL), promoted by Port Pipavav and the Ministry of Railways. GPPL has an
equity stake of 38.8% in PRCL. The port can handle incoming and outgoing trains
simultaneously, with six railway sidings to support loading and off loading. As per
management the turnaround time is ~2-3hours with a potential for the port to handle
up to 22 trains in a day (~4.5 rakes handled per day in 1HCY11). Pipavav was the
first port to receive double stacked container trains in Mar-2006. According to
management in a single stack rake it is possible to handle ~90TEUs and double that
in a double stacked train. As per company, Pipavav has an advantage over Mundra
Port in two respects- (a) The latter has to share the routes with Kandla leading to
congestion; (b) More rail passenger movement on Mundra rail routes vs. Pipavav. In
GPPL's view, Indian Railways has the following priority order for traffic- passenger
(highest), followed by foodgrains, fertilizer, coal and finally container (lowest).
Management gave us a thumb rule for port capex- a 300-350m quay length would
require ~Rs3.5-4bn capex assuming evacuation infrastructure is in place and
excluding dredging cost. For 1140m quay length implied capex @Rs3.5bn for 300m
quay length and stated dredging capex incurred so far (~Rs4-5bn) at Pipavav, brings
us close to 1HCY11 gross block of Rs17.1bn (see table 4 for quarterly balance
sheet).
Growth outlook and scalability potential at Pipavav
According to management, the advantages of location, connectivity and efficiency of
operations has made Pipavav the fastest growing container port in the country.
Shipping lines on major trade routes visit the port. The existing rail n/w offers
scalability potential comparable to Nhava Sheva. Implied realization (revenue/cargo
volume) at Pipavav port (see table 1, Rs322/MT in 1HCY11) is comparable to
MPSEZ.
As per company Phase-I of expansion plan at Pipavav would increase bulk
capacity to 20MTPA (from 5MTPA currently) and take container handling
potential capacity to 1.5mTEU from 1.3mTEU currently. This would entail a
ball-park capex in the range of ~Rs7bn and the plan would take ~18-24months from
ground breaking (post financial closure).
According to management, GPPL has signed MoUs with IPP developers (for
3.6GW) who will route coal through Pipavav Port. The projects include Videocon’s
2x600MW project (due in 2014 as per company). Other pipeline projects are by the
following companies- Torrent Power (2x600MW), Sintex (600MW), and Patel
Engineering (600MW). As per company, the projects would need coal of ~12MTPA
and would enter into take-or-pay contracts providing clear visibility on bulk cargo.
Currently APM Terminals is bidding alone for new port concessions in India,
however the possibility of bidding via GPPL in future cannot be ruled out according
to them.
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