Gujarat Pipavav Port 3QFY16: EBITDA in line, buy

Motilal Oswal | May 15, 2012, midnight

3QFY16 operating performance in line; PAT lower due to depreciation/tax: GPPV’s 3QFY16 revenue declined 10% YoY to INR1.7b (lower than the estimate of INR1.8b), driven by lower port volumes—mainly on the bulk front. However, EBIDTA for the quarter was flat YoY at INR1b— in line with our estimate. Better container volume (de-growth muted v/s expectation) and lower bulk (lower gross margin) led to better cost absorption and better EBIDTA margin. EBIDTA margin was 61% v/s estimate of 57.3%. Higher depreciation and tax, as also lower other income, impacted PAT. Reported PAT was INR533, down 40% YoY and lower than the estimate of INR639m.

Container volumes better, bulk volumes dip; liquid cargo ramp-up strong: GPPV’s container volumes stood at 178k TEUs (down 9.2% YoY), better than the estimate of 167k TEUs (estimated decline of 15% YoY)— led by return of customers to Pipavav port from the line shifted to competing port in 2Q. However, bulk cargo dipped to 0.44m tons v/s 0.63m tons in 2QFY16 (estimate of 1m tons)—led by lower coal/mineral volume; but liquid cargo volumes increase to 0.19m tons (estimate of 0.16m tons) v/s 0.16m tons in 2QFY16. Average realisation stood at INR461/ton, up 13% YoY.

Cut earnings, TP:We cut our earnings ~10% for FY16/17 to factor depreciation, other income and tax. We now expect GPPV to report earnings of INR2.3b in FY16 (down 38% YoY) and INR2.7b in FY17 (up 24% YoY). The stock trades at PER of 28x and P/B of 3.3x on FY17E basis. We cut TP to INR198/sh from the earlier INR206/sh. While near-term headwinds persist on demand front, sizable growth options, good quality management and high FCF/dividend possibility are the key positives.

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