Buy Gujarat Pipavav Ltd For Target Rs.100 - ICICI Direct
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Global container market showing growth spurts
About the stock: Gujarat Pipavav is a South-West Gujarat based port with an MNC promoter (APM Terminals – Maersk Group). It lies at a strategic international maritime location, which connects India with the Far East, on the one side, and Middle East, Africa, Europe and the US, on the other.
? The port container capacity is at 1.35 million TeUs, bulk capacity at 4-5 million MT and liquid capacity at 2 million MT
? Container segment comprises ~70% of revenues
Q1FY23 Results: QoQ lower bulk volumes impacted EBITDA.
* Net revenues de-grew 6% QoQ to | 208 crore
* EBITDA de-grew 12% to | 113 crore with margins at 54.4% (vs. 58.4% in Q4FY22)
* Subsequently, PAT de-grew 20% to | 59 crore as a weak operational performance was further impacted by an exceptional loss of | 13 crore
What should investors do? While the management expects bulk volumes to stay strong in FY23, container volumes are expected to make a comeback (led by DFC normalisation, lower congestion and freight volatility expected in FY23E).
* We remain positive on the stock and maintain our BUY recommendation
Target Price and Valuation: We value the stock at | 100 i.e. 15x P/E on FY24E EPS.
Key triggers for future price performance: With GPPL planning to build capacities in warehousing, its JV PRCL looking at growing CTO business and parent entity Maersk planning to build an end-to-end logistics infra in the country (could benefit GPPL); the company remains a play on growing logistics sector in India. However, extension of agreement with GMB remains a key event to watch.
? Addition of three service lines in FY23 expected to boost Exim volumes
? DFC commissioning is expected from September onwards (higher market share and time tabled train running)
? Debt free company with RoIC reaching ~40%+ levels in FY24E
Alternate Stock Idea: Apart from GPPL, we remain positive on Adani Ports.
? Adani Ports and Special Economic Zone (APSEZ) is the largest commercial port operator with 25% share of India’s port cargo movement. The company has evolved from a single port dealing in a single commodity to an integrated logistics platform
? We have a BUY rating on the stock, with a target price of | 900
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