Gujarat Pipavav Port - ICICI Securities Fundamental Top Picks for 2015

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Gujarat Pipavav Port (GUJPPL) Target Price: | 221 (16% upside)
• Gujarat Pipavav Port with a capacity of 850,000 TEUs and strategically
located on the western coast of India with proximity to industrial clusters
provides scope for significant growth. Besides containers, the port is well
equipped to handle bulk cargoes including fertiliser and agri-products.
Further, GPPL plans to expand its container handling capacity to 1.35
million TEUs as the port container volumes have grown at a CAGR of
~12% over CY10-13. In terms of infrastructure, the port is well connected
via road and rail besides housing a container freight station to manage its
throughput.
• Port revenues grew at a CAGR of ~22% over CY10-13 aided by ~12%
growth in container volume whereas bulk volume growth remained
mostly flattish. As nearly 70% of the revenue is derived from container,
GPPL’s growth was highly skewed towards a particular segment. In order
to diversify the cargo base, GPPL entered into various arrangements with
tank farms owners and providing Ro-Ro facility for auto logistics handlers.
Going ahead, as GPPL is present in proximity to auto hubs coupled with
acting as a gateway to northern hinterland auto manufacturers, it is well
poised to gain through new business addition
• 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% in CY11-15 whereas EBITDA CAGR is expected at ~27% in 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 arrive at a DCF
based target price of | 221