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Concession agreement expected in near term…

GPPL reported flattish container volumes QoQ (19% YoY due to weak base) mainly due to congestion in the Far-East ports (macro-disruption) while it reported 1 MMT volumes on the bulk front (full capacity utilisation). Liquid and RoRo continued to report subdued volumes. Overall, revenues remained flattish QoQ (up 19% YoY) due to subdued container growth. EBITDA margins expanded 400 bps QoQ (fell 226 bps YoY) led by a onetime bonus payment of US$1000 per employee in the base quarter and lower maintenance dredging expense QoQ. Subsequently, absolute EBITDA and PAT grew 5% and 11% QoQ, respectively.

Addition of two service lines expected to boost Exim volumes

The company has added a service line plying between Pipavav-Jebel Ali and a Far-East service (Pipavav-Shanghai), that are expected to contribute 50- 60000 TeUs to existing volumes. Going ahead, the management intends to reach a million TeU mark before CY23. The management further expects bulk volumes to remain at a record high during the year, as the proximity to UltraTech plant makes economic sense for the manufacturer to use GPPL port for its Exim operations (suffered damaged to its jetty during the cyclone). Further, the management also expects to add another warehousing facility for the bulk cargo in the near term (higher capacity). LPG operations are expected to get a boost, following completion of the VLGC berth, with an already operational rail line. RoRo activity, however, is expected to remain muted in the near term.

Agreement with GMB likely in near term

The 30-year concession agreement between GPPL, Gujarat Maritime Board (GMB) and Gujarat government ends in CY28. Upon expiry of the agreement, all assets have to be handed over to GMB based on valuation provided by an independent third party. The company, however, has received approval from its global parent to incur US$97 million on upgrading its container facility and increasing its yard capacity to 1.6 million TeU (current capacity 1.35 mil TeU). GPPL will require written permission from GMB authorities for extension of the concession agreement before incurring the capex. Following the disruption caused by the cyclone (two weeks shut operations for GPPL, resumes in the first week of June), the process related to extension has taken a breather and is expected to resume in June.

Valuation & Outlook

In spite of the subdued container volumes, the company did not register transhipment volumes (reflecting healthy container mix) and has also taken a 5-6% price adjustment from May onwards (still at a 15-20% discount to Adani Ports’ container realisation). We expect the normalisation of global container repositioning and extension of agreement to be key triggers for re-rating of the stock. We revise our target price to | 130 (earlier | 120) and maintain BUY rating.

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