Gujarat Pipavav Port - Volumes Pick Up Expected in CY13 - ENAM Direct

Gujarat Pipavav Port Ltd. (GPPL) 3Q CY12 operating performance was below our expectations with EBITDA Margin at 35.7% marred by oneoffs. The company reported Net sales of Rs 94.3 cr (-3% YoY; -8% QoQ) and EBITDA of Rs 33.7 cr (- 25% YoY; -29% QoQ). Adj. PAT increased 5% YoY to Rs 14 cr primarily on account of lower interest cost (adjusting for syndication cost of Rs 6 cr) in 3Q CY12.

Key Highlights

- Addition of new shipping lines can be near term trigger: Container volumes declined by 25% YoY to 125,945 TEU's due to volume loss arising from outgoing Maersk line- ME 1. The newly added service line is under the ramp-up stage; however the pick up has been slow. Management is in advanced talks with customers and atleast 2 new lines are expected to call at the Port in the near term. Further, it has also started a coastal service between JNPT & Pipavav that shall average 4,000 TEUs/month. Management believes the current volume levels are close to bottom and expects improvement in the coming quarters.

- Opening up new opportunities in Agri commodities: Bulk volumes at 0.75 MMT continued to get impacted due to lower coal imports. However, GPPL has tapped new opportunity by handling agro commodities (1st time ever handling of Wheat consignment for Govt. Of India) which will aid in partially offsetting weaker coal imports in the medium term.

- Blended realization to further improve: Blended realization increased by 17% YoY to Rs 382/MT on account of better product mix and benefit accruing from shift to USD based tariffs (applied from mid August 2012). Management expects 5-6% net realization benefits on account of this shift.

- Profitability impacted due to one time expenses: GPPL incurred 2 non-recurring expenditure totaling Rs 6 cr in 3QCY12, which impacted its profitability. Excl. these expenses; GPPL's EBITDA would have been Rs 39.7 cr (margin of 42%) as against reported EBITDA of Rs 33.7 cr (margin of 35.7%). Going forward; in absence of the abovementioned non-recurring costs + commencement of RMGC's operations & utilization of mechanized fertilizer shed; will result in cost savings for GPPL.

- Interest cost savings a positive:- Shift of debt mix in favor of dollar denominated loans will result in lower interest outgo thereby augmenting bottom-line going forward.

Valuation

Based on weaker than expected performance in 3QCY12; we have reduced our EPS est. to Rs 1 and Rs 1.5 for CY12 & CY13. We maintain 'BUY' on the stock with a reduced DCF based SOTP Target price of Rs 60 (earlier TP-Rs 66).

Source : Equity Bulls

Keywords