>Gujarat Pipavav Port Limited: Q4 CY11 RESULT UPDATE (BP WEALTH EQUITIES)

Result Highlights

⇒ The company reported total income of Rs 1,159 mn during Q4CY11 up 18.5% QoQ and 39.7% YoY on the back of increase in container volumes by 31% YoY and increase in bulk volume by 10% YoY. Realizations in containers increased by 17% YoY and realizations in bulk increased by 10% YoY which aided the revenue growth.

⇒ Management said that there was higher amount of fertilizer volume during the quarter as compared to the previous quarter as the government sourcing had increased due to which bulk volumes increased 10% YoY. Issues in the power sector has caused power companies in the vicinity of Port Pipavav to go slow on their proposed development of power plants which could lead to a decline in handling of coal volumes at the company’s port going forward. Capacity addition in the container business and addition of four new container lines in CY11 has helped container volumes to increase by 31% YoY.

⇒ The company achieved EBITDA margins of 50.9% in the quarter an increase of 488 bps QoQ and 702 bps YoY on the back of better realizations on containers, higher volumes of reefer cargo, favorable exchange rate and higher container storage during the quarter. There was also a one time upside on account of favorable write-backs of volume rebate provisions during the quarter which helped margins to improve by 200 bps.

⇒ The company’s net profits increased by 104.3% QoQ and by 145.2% YoY to Rs 270 mn in

Q4CY11 with net profit margins increasing by 978 bps QoQ and by 1,055 bps YoY to 23.3% during the quarter. The company’s interest cost declined marginally by 1.7% QoQ to Rs 208 mn and its depreciation cost increased by 22.6% QoQ and by 25.6% YoY to Rs 161 mn on account of addition of new assets during the year.

Expansion Plans

The company has increased its container yard capacity to 850,000 TEUs and would increase it further depending upon the needs of its clients and growth in volumes. The company is targeting completion of its High Cube Double Stack Project and expansion of its fertilizer shed by Q3CY12. It has also placed order for purchase of three Rail Mounted Gantry Cranes and has targeted installation and commissioning it by Q4CY12.

Valuation & Outlook

The company has repaid debt amounting to Rs 895 mn CY11 which has reduced its interest payment substantially and going forward on the back of capacity and margin expansion we believe GPPL to post healthy revenue and profits. At CMP the stock is trading at 11.4x CY13E EV/EBITDA and 19.3x CY13E P/E. We continue to value the stock based on DCF methodology and arrive at a target price of Rs 66. We have assigned BUY rating on the stock.

RISH TRADER