Gujarat Pipavav Port - Kotak

GPPL is the first private sector port concessionaire which is responsible for introducing the concept of private sector investment in landlord port model in India. The multi-commodity port currently has a capacity to handle 5 mn tonnes of bulk cargo and 1.3 mn TEUs (Quay side) besides a berth to handle LPG cargo. Strong parentage of AP Moller Maersk (APMM) with a 43% stake provides assured container volumes to the port. This forms ~50% of the container traffic at the port. With congestion at JNPT and proximity to NCR, the company is strongly placed to attract container volumes going forward.

We expect container volumes for the port to grow at a healthy 12% CAGR over CY11 to CY13E. We are not very optimistic about the bulk and liquid cargo in near term as captive liquid and bulk volume would depend on revival or restart of certain stalled projects in the vicinity. Overall we estimate volumes for the port to grow at 12% CAGR over CY11 to CY13E with significant contribution from containers. With improving operating leverage, we expect the margins of the company to improve.

The stock at CMP trades at 18.6x CY13 earnings. We also expect the debt situation of the company to improve going forward. We are optimistic about the future performance of the company and initiate coverage on the company with a ACCUMULATE rating with a target price of Rs.64 for the stock.

Source : Equity Bulls

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