Opening new avenues!!! • Gujarat Pipavav Port (GPPL) :: ICICI Securities, report link

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Opening new avenues!!!
• Gujarat Pipavav Port (GPPL) posted spirited revenue growth of nearly
35% YoY but remained flattish QoQ at | 170.1 crore vs. our estimate
of | 178.1 crore
• EBITDA for Q3CY14 grew strong with 56% growth YoY to | 96 crore
whereas QoQ it declined ~3% due to additional equipment expense
and revision of trailers freight charges after three years. On the
EBITDA margin front, margins expanded ~772 bps to 56.4% due to
higher container volume growth (18% YoY) on account of upsizing of
vessels and operational efficiencies
• PAT for the quarter grew~103% YoY (lower base) and 11.2% QoQ to
| 89.5 crore. The other income for the quarter stood at | 19.2 crore
aided by dividend from PRCL to the tune of | 15.2 crore
• Container volume for the quarter stood at 194,000 TEUs vis-à-vis
163000 TEUs in Q3CY13 and 203000 TEUs in Q2CY14. Bulk volume
stood at 1013000 MT vs. 986000 MT in Q3CY13. Commencing of
new business, the liquid cargo for the quarter stood at 96,695 MT
Containerisation, strategic location steer volume growth
As 70% of GPPL’s cost is fixed, volume availability and growth are critical
to its profitability. Owing to its strategic location on the Indian west cost
and proximity to industry clusters in the region, volume growth is
considerably healthy. Further, with robust growth in global container
volume (8% CAGR in 2000-10) due to increased intra-Asia trade coupled
with low level of container penetration in India (at 68% against global
average of 80%) there is ample scope for growth of container segment.
Container capacity addition remains muted in major ports
Regulatory bottlenecks have led to negligible container capacity additions
in major ports over the last decade leading to capacity constraints. Major
ports face severe congestion resulting in a very high turnaround time
(TAT). Slippage in capacity addition is as high as 70% in ports like JNPT
that handles nearly 60% container cargo for India. In such a scenario,
ports like GPPL stand to gain as cargo handling transits to minor ports
due to high mechanisation at port along with good storage and
evacuation facilities synergise port operations leading to lower TAT.
Aligning capex with demand scenario
GPPL’s present capacity stands at 850,000 TEUs and is operating at ~85%
utilisation. Consequently, requisite capex is necessary to maintain healthy
operating level (70%). Going ahead, the company plans to expand its
capacity to 1.35 million TEUs by converting its multi purpose berth into a
fully operational container handling berth. Also, GPPL has ample flexibility
and regulatory clearances (valid till 2019) in terms of capex to extend its
bulk handling capacity as and when required. Further, GPPL has set up
tank farms with partners to improve its value proposition as well as add
another stream to its revenue, which is expected to scale up significantly
over the time period.
Additional scope of revenue, better volumes support valuation
With GPPL’s debt-free structure and ECB for funding further capex,
interest cost is expected to decline substantially. Further, GPPL’s higher
revenue visibility and better margin on account of fixed cost model
together with revenue from tank farms will provide further upside.
Consequently, we maintain our estimates and have a HOLD
recommendation on the stock with a DCF based target price of | 175.

LINK
http://content.icicidirect.com/mailimages/IDirect_GujaratPipavav_Q3CY14.pdf