Gujarat Pipavav Port - Stellar performance continues - GEPL Capital

Incremental volumes assures revenue and profitability growth with operating margins intact In Q2CY13, GPPL reported 33% Y-o-Y growth in total revenues to Rs. 1,220 mn as compared to Rs. 1,025 mn in Q2CY12. Container volumes for the Q2CY13 witnessed a substantial increase of 17% Y-o-Y to 143,000 TEUs as compared to 122,000 TEUs in Q2CY12, however, on sequential basis the volume decreased by 11%. The company has done away with lower volumes with retirement of parent company's vessel ME1 and has successfully managed to increase volumes with other vessels calling on- board. In Q2CY13, GPPL witnessed addition of one international vessel (fareast service) and lost one international vessel. There was a domestic vessel operating from JNPT to Pipavav port mostly carrying cement also discontinued to call on Pipavav port due to economic downturn. Pipavav Rail Corporation (PRCL) witnessed 672 journeys by almost 250 rakes operated in Q2CY13, which carried 101,590 TEUs to the hinterland. As on March 31, 2012, PRCL's net profit stood at Rs. 540 mn at net profit margin of 36% with no debt, past losses written off and positive net worth.

On the other hand, even Dry-bulk Volumes in Q2CY13 witnessed 17% increase Y-o-Y and stood at 1.02 mn tonnes as compared to 0.87 mn tonnes in Q2CY12. This increase was mainly due to improved coal and minerals volumes which, subsided the negative effect of slowing fertilizers volume. Due to change in the handling of commodity mix, in Q2CY13, there was significant mix of agro products along with coal in the dry cargo, which enabled higher realizations and hence subsided the effect of fertilizer volume decline.

Interest outgo of Rs. 95 mn was down by 54% Y-o-Y. On cost front the company witnessed 19% Y-o-Y growth in total operating expenses to Rs. 670 mn in Q2CY13. Operating cost which comprised of 50% of total cost, witnessed 29% increase on Y-o-Y basis on account of increase in equipment hire charges and high power and fuel cost. However, EBITDA margins remained intact at 45% in Q2CY12. Finally net profit stood at Rs. 352 mn, which accounts for EPS of Rs. 0.73 in Q2CY13.

As expected, GPPL has performed well in this quarter coupled with increase in market share by 6%. Business environment is not at all gracious, still the company has managed decent gains in volumes and profitability. The liquid logistics expansion is on schedule and volume is expected to start flowing from Q4CY13. Timely expansion of port capacities and logical diversification in liquid logistics business is expected to augur well for GPPL over a period of time.

We maintain our estimates for CY13 and CY14 and our BUY rating with a Price Target of Rs. 56.

Source : Equity Bulls

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