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Monday, December 5, 2011

Gujarat Pipavav Port Ltd:-Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Gujarat Pipavav Port Ltd

Story:GPPL is managed by A.P. Moller-Maersk (APMM) group, one of the largest container terminal operator in the world due to which GPPL has benefits like access to modern technology, operational knowhow, best industry practices, increased bargaining power and competitive rates for purchase of port equipment. Maersk line and Safmarine Container Lines belonging to APMM group are amongst GPPL’s largest clients. APMM group contributed 30% towards GPPL’s total revenues during CY10.Container traffic is generally said to grow at 1.5 times the GDP growth rate and container traffic has achieved ~14% CAGR at all Indian ports during the last 10 years. GPPL has achieved 34% CAGR in its container volumes over CY07-CY10 and I believe strong GDP growth and faster growth in external trade would drive growth in container volumes across the country. Since GPPL is located on the western coast close to the key cargo rich markets of northwestern India, I believe the port would achieve at least 17% CAGR in its container volumes over CY11E-CY15E. Capacity utilization for Mormugao, Mumbai, Kandla and JNPT ports, all located on the western coast, were 122%, 123%, 94% and 100% respectively during FY11 due to which I believe incremental container traffic arising over the coming years would flock to non-major ports located on the western coast such as Mundra and Pipavav port. Pipavav port can treble its container capacity to 3.6 mn TEUs from the current 1.2 mn TEUs and it also has superior road and rail connectivity to cargo rich northwestern markets which makes it a preferred port of call for container lines.The company has repaid significant amount of its debt during the past 18 months which has reduced its interest payment substantially and going forward on the back of capacity and margin expansion I believe GPPL to post healthy revenue and profits. At CMP the stock is trading at 12x CY13E EV/EBITDA and 18x CY13E P/E.I initiate coverage on GPPL with a BUY rating and have arrived at target price of Rs 78 based on DCF valuation which implies 30% upside from the current levels,to be achieved over the next 12 months.

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