Market Price Rs 161 (FV 10 ) Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 7846 crs Date: 30th October 2015
Target : Rs 250 Investment Timeframe : 1 year
About the Company:
Part of the APM Terminals network
Port Pipavav leverages the shipping experience, strengths and network of its parent, APM Terminals, which operates 56 ports and terminals and 154 inland services in 63 countries.
Strategically located all weather port
Port Pipavav is an all-weather port located just 152 nautical miles from Nhava Sheva in Mumbai. The port's location in the state of Gujarat provides immediate access to a rich hinterland and key markets in northwest India.
Large land bank available for growth
With a total land area of 631 hectares, there is plenty of land available for expansion of port-related services and businesses. The port has leased out land for a variety of services including liquid cargo facilities.
Port Pipavav is managed and operated by APM Terminals, the ports and terminals company of the maritime giant, the A.P. Moller-Maersk Group. APM Terminals is one of the largest container terminal operators in the world and offers the global shipping community an integrated Global Terminal Network of 56 ports and 154 inland facilities in 63 countries. With a presence in every major market, APM Terminals serves all major trade lanes providing our customers with the most advanced terminal technology, equipment and operations in the industry. It has two facilities in India currently - India's largest and most successful container terminal, APM Terminals Mumbai ( earlier known as Gateway Terminals India), in JNPT at Nhava Sheva, Mumbai; and Port Pipavav in Gujarat. Port Pipavav, a successful public-private enterprise, is emerging as an important gateway port on the West Coast of India for containers, bulk and liquid cargo. Located just 152 nautical miles from Nhava Sheva in Mumbai or 10 hours steaming time, Port Pipavav provides excellent access to the main shipping lines as well as to the cargo belt in the northwestern region of India.
The price of GPPL dipped form Rs 180 to Rs 161 levels as the net profit of the company was down 41% year on year at Rs 53 crores as against 90 crores and expectations of 91 crores by analysts for quarter ended sep 2015. The growth has been muted due to the challenging environment.
The company has seen very good increase in net profits. It had sales of Rs 396 crores and net profit of Rs 57 crores in the year 2011.
For the year 2013, the sales were at Rs 416 crores and net profit was at Rs 74 crores.
For the year 2014, the sales were at Rs 517 crores and net profit stood at Rs 191 crores. The company has extended its year ending by 3 months to March 2015. The Net profit came in at Rs 387 crores and EPS stood at Rs 8 per share.
The year 2016, will be a bit challenging and net profits will be slightly lower as growth is muted by the year 2016-17 will be very good.
With a 43.01% stake, APM Terminals is the largest shareholder in Port Pipavav. Port Pipavav went public in September 2010 and raised Rs 500 Crores capital from the markets. Other key shareholders in Port Pipavav are: New York Life International India Fund (Mauritius) LLC; IDFC Infrastructure Fund; The Infrastructure Fund of India; IL&FS Trust Company Ltd.; Jacob Ballas Capital India Pvt. Ltd.; Unit Trust of India; Industrial Development Bank of India; and India Infrastructure Fund. Fii’s hold about 37% Dii’s hold 12% while the public is left with just 7.75%
Comparisions to Peers:
Adani Port is the only listed player and it has a debt of 8200 crores while Guj Pipavav Port is Debt free company.
Running ports in so many countries just gives us an idea of APM Terminals. It is a unique business with huge capital requirements and there are entry barriers which make it very profitable in the longer run.
Gujarat Pipavav is expanding the capacity from .85 million TEU’s handling capacity to 1.35 million TEU’s capacity. The cost will be 460 crores in total.
The company has prepaid its loans so it is now a debt free company.
Even the expansion will be carried out from the cashflows of the company. The whole capacity expansion will be running by Q1 , 2016.
One should not be bearish due to the current results. There was a water log in July and that has also had an impact on the results apart from the global slowdown in movement of goods.
At current price of Rs 161 per share the company is into one of the unique fields of port which has big entry barriers and it can be taken as a long term call, the company can become a multibagger. One year target is Rs 250.
( Disclosure: The analyst has family holdings in the company as on date of issue being published)
Sebi Registration No: INH000001717