Gujarat Pipavav Port - Reefer Containers Beef Up Revenue; Result Update Q4CY14 ::Edelweiss, report

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Gujarat Pipavav Port’s (GPPL) Q4CY14 PAT of INR893mn was lower than our INR943mn estimate due to lower-than-estimated container volumes and EBITDA margin. While management remains confident of 10-15% container volume growth, revival of the currently slowing Chinese and European markets is key. With sharp run-up in the stock price amidst near-term headwinds of moderating demand and capacity constraints, we find the stock expensive at current valuations.

Container volume growth moderates

Container volumes of 196kTEUs (flat YoY) were lower than the estimated 220kTEUs largely due to drop in cotton exports (YoY impact of 20kTEUs), while bulk volume of 1.2MT was in line. However, higher proportion of reefer containers improved realisations, which led to in line revenue of INR1.8bn. EBITDA margin at 54.5% (350bps lower than estimated) was impacted due to higher mix of fertiliser cargo during the quarter resulting in lower-than-estimated EBITDA and PAT of INR893mn (INR943mn estimate). Despite high utilisation levels for existing container berths, management is confident of its readiness to meet 10-15% growth. Management highlighted that while trade is improving in the US, the currently moderating markets of China and Europe are key for traction in cargo for Pipavav.

Capex plan on track

The INR4.6bn capex plan (INR3.6bn debt) to enhance capacity of container handling is on track (awarding of contracts to be concluded during the current quarter) and expected to be commissioned by early CY16. Since, in the past, the port has been able to manage ~77kTEUs/month (~1mnTEUs annualised), management is confident of handling additional cargo till the new capacity is commissioned.

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https://www.edelweiss.in/research/Gujarat-Pipavav-Port--Reefer-Containers-Beef-Up-Revenue;-Result-Update-Q4CY14/28249.html