Gujarat Pipavav (BUY): Much stronger than expected - Ambit

Gujarat Pipavav (GPPL) reported significantly better-than-expected results. The main positive surprise was the 23% YoY revenue growth, against our expectation of flat revenue. It appears to us that, in addition to the adoption of US$ based tariff, higher volumes from new shipping lines has led to the strong revenue performance. Other expenses (as a % of sales) declined by 390bp YoY on account of higher operating leverage which resulted in 90bp YoY expansion in EBITDA margin. However, employee expenses were higher than expected.

Interest cost declined by 54% YoY, due to debt repayment from the equity proceeds. The combined impact of higher revenue, better margin and lower interest cost resulted into PAT growing by 151% YoY. The company seems to have recovered majority of the volumes since the distortion in April-2012. Long-term contracts with two shipping lines when container trade volume growth is paltry, highlights the strong hinterland connectivity led competitive advantage that the port enjoys apart from its strong parentage.

We maintain BUY with a 1-year forward valuation of Rs70. The stock presently trades at 14.0X CY13 PAT and 1.5X CY13 ending book of Rs29/share. We will write a more detailed notes post the earnings call today.

Source : Equity Bulls

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