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Positional Call: Buy Gujarat Pipavav Port for 20% upside in 3 months -
Positional Call: Buy Gujarat Pipavav Port for 20% upside in 3 months
Rudra Shares and Stock Brokers | Published: 19 May, 2017  | Source :

Investment Rationale

The port is in a strategic location (closer than ]NPT, India’s container hub which is operating at peak capacity and struggling to add capacity) along with bright outlook for cargo growth at the port and uptick in utilization level, GPPL is planning to be ready for the next leg of growth by enhancing capacity and improving operational efficiency.

Volume growth remain subdued, JNPT gearing up newer capacity......

The total container volumes at major ports grew 3% YoY to 8.5 million TEUs compared to 8.2 million TEUs in FY16. Following the subdued trade in the west coast container volumes at ]N PT remained flattish in FY17. Furthermore, with a planned new terminal, NPT’s handling capacity would double to 5 million TEUs compared to existing 2.5 million. On the other hand, Mundra port is getting aggressive and experiencing robust growth in its container volumes. With competition heating up in the western coast of India GPPL realization are expected to remain subdued impacting the revenue visibility.

Benefits from rising auto exports >> Handles 1 lakh automobiles

APM Terminals Pipavav has reached a milestone of 100,000 automobiles handled at the port’s Roll On-Roll Off (Ro/Ro) facility, within 20 months of commencing auto-loading and discharging operations. The port has benefited from exports from the fast-growing automotive industry. India's passenger car exports have grown by 46% over the previous five years to a record 654,000 in 2016 and an investment of $3 billion is expected in Gujarat alone by OEMs by 2020. Serving the many auto-manufacturing facilities located in Gujarat by automotive giants like Ford Motor, General Motors (GM), Suzuki Motors and Tata Motors, port has been able to capitalize on the export-oriented production taking place in the state.

With the Indian government's 'Make in India' initiative, company have seen a surge in automotive manufacturing investment in the Sanand, Hansalpur and Vithalapur belt in Gujarat, and its modern and efficient Ro/Ro facility can play a major role in India's emergence as a major automotive exporter.

Dry bulk and container business volumes:-

Dry bulk volumes adversely impacted in the quarter at 301000 MT vs. 502000 MT in Q3FY17 and 377000 MT in Q4FY16, tumbled 20% YoY due to lower fertilizer volumes, which were pushed to ensuing quarters due to postponement of the urea policy. Also, container volumes came in at 158000 TEUs, dipped 11% YoY due to lower reefer volumes during the quarter. However, liquid cargo volumes grew 1% YoY to 250000 MT vs. 247000 MT in Q4FY16 and 230000 MT in Q3FY17 and volumes from RoRo activity were at 18 calls handling 24000 cars.

Dent from container and bulk business is expected to be completely offset by improvement in liquid cargo and Ro-Ro facilities. These businesses attract higher realizations as they involve specific cargo. As nearly 70% of GPPL’s cost is fixed, the new high realization businesses and ramp up in volumes would improve EBITDA margins.

Strengthening of balance sheet coupled with consistent revenue growth and improving EBITDA margin would enable GPPL to catalyze its earnings growth. Also, over a longer period with volume visibility from container shipping lines being intact and addition of new revenue stream in the form of tank farms & auto exports, there will be healthy revenue growth for GPPL, going forward.

Furthermore, GPPL’s debt free structure and capex funding from internal accruals, would result in zero interest cost and higher internal accruals that would generate higher other income and also enhance margins and profitability.

  • Trend line shows support Rs 152.93
  • Below trend line shows resistance at Rs 171.25 & after that next resistance is at Rs 186.30.
  • If trend line cross the resistance of Rs 186.30, then it may reach to 52 W/H @ 192, which is also our target in short to medium term.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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