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Gujarat Pipavav Port Ltd Research Report - 02nd Feb 2016

Infrastructure | Published on Feb 02nd 2016


For 3QFY2016, Gujarat Pipavav Port (GPPL) reported 10.3% yoy decline in revenues to Rs152cr. On sequential basis revenue was up 8.3%. Reported top-line number is below our expectation of Rs170cr. Top-line de-growth on a yoy basis is on account of (1) 9.2% decrease in Container business volumes (to 178,000TEUs), and (2) 63.3% decrease in Dry Bulk business (to 443,000MT). GPPL reported an EBITDA of Rs87cr, which is ahead of our expectation of Rs81cr. The reported EBITDA margin of the company came in at 57.1%, up from 48.2% in the sequential previous quarter and from 50.5% in the corresponding quarter a year ago. EBITDA during the quarter benefitted from shift in business mix and Rs1cr of reversal with regards the dredging cost. GPPL reported an Adj. PAT of Rs53cr, down 40.3% yoy, and 12.6% qoq. Adj. PAT margin for the quarter came in at 35.0% vs 52.7% in the corresponding quarter a year ago. Adj. PAT number, on yoy basis, was impacted by (1) Rs28cr of tax expense (vs tax exemption in 3QFY2015), (2) 53.4% increase in depreciation expenses to Rs25cr, and (3) 1.6% decrease in other income to Rs20cr. The sharp increase in depreciation expense is owing to the change in the estimated useful life of assets. Outlook and Valuation: At the current market price of Rs156, GPPL is trading at FY2016E and FY2017E P/E multiple of 31.4x and 31.4x, respectively. We have valued the Ports business using free cash flow to equity holders (FCFE) to arrive at FY2017E based business value of Rs160. We have assigned 10x P/E multiple to our FY2017E earnings estimate of Pipavav Rail Corporation Ltd (PRCL) to arrive at business value of Rs7 (adj. for 38.8% stake). On using the sum-of-the-parts (SOTP) based valuation methodology, we arrive at a FY2017E based price target of Rs167. Given the limited upside potential in the stock from the current levels, we maintain our Neutral rating on the stock.

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CMP 156
Target Price
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others5.0
Grand Total100.0

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