Gujarat Pipavav Port Ltd - Kotak

We met the management of GPPL to get an insight on the future developments in the industry and the company. We believe container volume for the company to remain strong with the full impact of new lines added in Nov-Dec 2012 contributing to the volumes. With JNPT operating at 100% capacity utilisation, incremental volumes on the West coast may come to GPPL leading to potential addition of new lines in CY13E. GPPL is also adding capacity in its container segment from current 0.85 mn TEUs to 1.5 mn TEUs by CY15E.The company has tied up ECB finance (low average cost) for this capex at the port. 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 container volumes for the port to grow by ~11.8% to 0.64 mn TEUs in CY13E and by ~19% to 0.76 mn TEUs in CY14E. With improving operating leverage, we expect the margins of the company to improve. Debt situation of the company has also improved. The stock has fallen by almost 20% in the last six months (period when the company lost container business to other ports). We believe all the negatives have got factored in the current price and Reiterate BUY rating with a target price of Rs 54 for the stock.

Source : Equity Bulls

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