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  • Stock recommendation: Gujarat Pipavav Port — Buy — Target price Rs 150

    Publish date: August 13, 2018

    Results update: Volatile trends beyond exim container

    Rise in exim container volumes has been the sole bright spot for Gujarat Pipavav Port in the quarter ended June, despite favorable currency and good exposure to other businesses.

    Increased competition in the market is another reason for the port company reporting underwhelming earnings data.

    Key highlights

    • The exim container volumes remained stable on a quarterly basis despite seasonal low. The coastal container volumes fared decently but trans-shipment numbers were markedly low from the previous quarter.
    • Lower LPG volumes and intense competition are the key reasons for sequential decline in liquids. The management, however, has invested in tank capacity for long-term gains.
    • The company’s roll-on, roll-off (ro-ro) business has only one client and therefore, its success depends on the client’s financials.
    • Gujarat Pipavav saw its revenue/EBITDA/profit after tax (PAT) grow 4%, 8% and 7% respectively, which is below our estimate.

    Valuation & outlook

    The management is confident about long-term potential of its cargo business, including exim container, trans-shipment and ro-ro segments.

    We also remain positive because the company’s exim balance has improved and the coastal business shows promise.

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