Diversified cargo to augment growth… Gujarat Pipavav Port :: ICICI Securities, link

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Diversified cargo to augment growth…
Gujarat Pipavav Port (GPPL) has entered into an arrangement with NYK
Auto Logistics (India) Pvt Ltd (NYK) where NYK has sub-leased land for
developing a dedicated common user integrated roll-in roll-out (RO-RO)
yard at Pipavav Port. The RO-RO yard has annual designed capacity to
handle 250,000 vehicles and is expected to be operational in the first
quarter of CY15. This is another effort on part of GPPL to diversify its
cargo base, thereby insulating itself from a downturn in any particular
segment. Earlier this year, GPPL commenced its new business line of
handling liquid cargo (handled nearly 96,695 MT in Q3CY14). This is
further expected to ramp up as new capacity gets added and the existing
stabilises. The container volume for GPPL has shown strong growth of
~25% YoY due to addition of new services over the years and upgradation
of existing clients; also, going ahead we anticipate container
volume to post CAGR of ~17% over CY13-16E. However, any new line of
business is expected to smoothen out the volatility of revenue growth.
Pick-up in auto exports to augment revenue growth for GPPL
Car exports in India have grown at a CAGR of ~18% over FY07-14 with
top two exporters growing at nearly 12% CAGR. Majority of the car
manufacturers are based out of north and west India for which the
western ports form the gateway. Also, the presence of major auto hubs in
Gujarat and Maharashtra and lack of such facilities (RO-RO terminal) in
India provides assurance of cargo availability for ports. Going ahead, as
car exports are expected to grow at a CAGR of 18-20% over FY14-17E,
setting up of the RO-RO facility will further strengthen revenue growth for
GPPL.
Exhibit 1: Top car exporters in India
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
CAGR
(FY07-14)
Hyundai 115525 144439 253344 285658 233069 237535 259811 233260 10.6
MSIL 39295 51669 70023 147575 138266 127372 120388 101352 14.5
Ford NA NA NA NA 12155 25616 29316 48088 41.0
Nissan NA NA NA NA 46135 100909 98971 116314 26.0
Total 154820 196108 323367 433233 429625 491432 508486 499014 18.2
Source: ICICIdirect.com Research
Improved cargo mix to enhance revenue growth, valuation up-tick
With the addition of a couple of new business lines and improved
revenue visibility, GPPL is expected to post a revenue CAGR of nearly
20% over CY11-15 whereas EBITDA CAGR is anticipated at ~27% over
the same period. As nearly 70% of GPPL’s cost is fixed, the new business
is expected to further improve the operating leverage, thereby aiding the
EBITDA margin. Further, GPPL’s debt free structure and ECB funding for
new capex is expected to bring down the interest cost. A diversified
cargo portfolio and presence in high growth segments like tank farms and
auto export provide confidence on the earnings growth of GPPL.
Consequently, we revise our estimates upwards and have a BUY
recommendation on the stock with a DCF based target price of | 221.

LINK
http://content.icicidirect.com/mailimages/IDirect_GujaratJPipavav_Update_Dec14.pdf