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Recommendation CMP

BUY

Rs.48 NA

Target Price Sector

Marine Port & Services

Stock Details
BSE Code NSE Code

533248 GPPL GPPVIN 2272 56.99 54/41 62,390 10.00 Nil

Bloomberg Code Free Float (%)

Market Cap (Rs cr) 52- wk HI/Lo (Rs) Avg. volume BSE (Quarterly)

Face Value (Rs)

Dividend (CY 12) Relative Performance 1Mth 5.0% 3Mth 3.60%

1Yr -6.28% 11.2%

GPPL Sensex

4.56% -1.67%

Gujarat Pipavav Port LTD (GPPL) is Indias first private sector port and is managed by APM Terminals which is a part of APM Moller Maersk Group. APM Terminals operates around 60 ports and 132 inland services widely diversified geographically across 63 countries. GPPL operates 20mtpa (~1.2 mn TEU container and 5mt bulk) port at Gujarat and is looking to expand container capacity to 1.5mn TEU and bulk capacity to 10 mtpa. Western corridor including Gujarat and Maharashtra handle more than 60% of all India container traffic due to higher density of industrial hubs in that region. GPPLs location in close proximity to the congested JNPT port acts as an advantage in gaining more cargo getting diverted towards it. We believe, GPPL would continue to witness good growth in both bulk (due to higher coal and fertilizer imports) and in container volumes (due to churn in liners and upsizing of vessels). The current quarter results witnessed 29% YoY/14% QoQ growth in container volumes and 31.5% YoY/-3.1 QoQ growth in Bulk Volumes. With improving trade conditions, we expect this growth to continue in the coming quarters. At CMP, the stock is trading at 13x its expected CY14E consensus estimates and investors can BUY the stock for 15-20% gains in the medium term. Q3CY13 results above expectations: Revenues grew by 36.5% YoY on the back of 29% YoY growth in container volumes due to uptick in seasonality and addition of newer services and rate hikes. Bulk Volumes too have surged 31% YoY on the back of higher coal imports. We believe container and bulk volumes to grow at robust pace in the coming quarters on the back of uptick in volume growth, better realizations due to dollarization of revenues.

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Shareholding Pattern

30 Sep 13

Promoters Holding Institutional (Incl FII) Corporate Bodies Public & others

43.01% 46.37% 7.01% 3.61%

Kavita Vempalli Research Analyst (022 3926-8173) kavita.vempalli@nirmalbang.com Sunil Jain HOR Retail sunil.jain@nirmalbang.com (022 3926-8195/96)

Strategic Location Biggest Advantage: The port is in a strategic location just 152 nautical miles from the congested JNPT Port (less than 10 hours journey). This port provides excellent access to the main shipping lines as well as to the cargo belt in NW region of India. Part of professionally run APM Terminals Group: GPPL leverages the shipping experience and wide network of its parent, APM Terminals which operates 60 ports and 132 inland services across 63 countries. Large Land Bank Available for expansion: GPPL is looking to augment its container and Bulk capacity by adding up more berths at its port at a project cost of Rs.11 bn. The total land of the port is of 631 hectares and there is plenty of room for future expansion. GPPL has also leased out the land for variety of services including liquid cargo facilities. Company has tie ups with Aegis Logistics, Gulf Petrochem and IMC Ltd for import-export of liquid commodities. With their capacities coming on board by mid of CY14, we believe GPPL would further gain focus with increase in liquid volumes. Value Holding in PRCL GPPL has 38.8% stake at an investment of Rs.83 crore in the rail connectivity project initiated by Pipavav Rail Corp Ltd (PRCL) in JV with Ministry of railways. GPPL is the first port to receive double stacked container trains in March06 which has resulted in reduction of termi nal congestion, lower haulage charges and overall transit cost is reduced. PRCL made Revenues and PAT of 180 crore and Rs.46 crore respectively in FY13.
Margin (%) PAT (Rs cr) Margin (%) EPS (Rs) PE (x) EV/EBITDA

Year Consolidated

Net Sales (Rs cr)

Growth (%)

EBITDA (Rs cr)

CY10 CY11 CY12

283.9 395.9 416.0

28.6% 39.4% 5.1%

114.4 181.7 181.9

40.3% 45.9% 43.7%

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-54.7 56.8 74.0

-19.3% 14.3% 17.8%

-1.2 1.4 1.6

-36.5 32.5 26.7

21.2 13.6 13.1

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Company Description
Gujarat Pipavav Port Ltd. (GPPL), Indias first private sector port, has multi-cargo and multiuser operations in the state of Gujarat. The Company has emerged as one of the principal gateways on the West Coast of India and provides excellent access to shipping lines through international routes as well as for the cargo belt in North and North- West Region of India. The port has Container capacity of ~ 850,000 TEUs pa, Bulk Cargo capacity of ~ 5 MTPA and Liquid Cargo capacity of ~ 2 MTPA. APM Terminals is the Lead Promoter of the Company and holds 43.01%. It is one of the largest ports and terminals operators in the world and part of A.P. Moller-Maersk Group (APMM). APM Terminals has global terminal network of 25,000 employees in 68 countries including interests in 69 port and terminal facilities and 160 Inland Services operations.

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Q3CY13 Result Analysis (in Rs Crs.)

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Operating Expenses

Employee expenses Other Expenses EBITDA Depreciation

30.2 11.2 23.4

33.4 10.9 22.8

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Revenues

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Q3CY13 126.3

Q2CY13 122.0

QoQ 3.5%
(9.6%) 2.9% 2.8%

Q3CY12 102.5
29.0 9.1 22.6

YoY 23.2%
4.2% 23.7% 3.4%

61.5
48.7% 14.9 9.8 9.8 7.4

54.9
45.0% 15.1 9.5 9.5 4.9

11.9%
365 bps 3.3% 3.3% 51.9%

33.7
32.8% 13.7 17.7 17.7 5.9

82.7%
1586 bps (44.5%) (44.5%) NA

Margin

Interest Expenses Other Income Exceptional

Profit Before Tax

Margin Total Tax

44.2
35.0% 0.0

35.2
28.9% 0.0

25.4%
611 bps

8.2
8.0% 0.0

441.0%
2703 bps

Profit After Tax

Margin

44.2
35.0%

35.2
28.9%

25.4%
611 bps

8.2
8.0%

441.0%
2703 bps

Basic EPS

0.9

0.7

25.4%

0.2

441.0%

Source:Nirmal Bang Retail Research

Highlights of the Quarter

Revenues grew by 36.5% YoY on the back of 29% YoY growth in container volumes due to uptick in seasonality and addition of newer services and rate hikes. Bulk Volumes too have surged 31% YoY on the back of higher coal imports. However, on a QoQ basis, bulk volumes have gone down by 3% due to lower volumes in fertilizers and minerals. EBIDTA margins went up by 370 bps QoQ on the back of better realizations and price hikes. Company earned a dividend income of Rs.3.8 crore from PRCL which is included in Other Income.

1 year Forward Chart based on Consensus Estimates

Key Risks to our Rational

1. Lower than expected ramp up in cargo : Lower than expected growth rates for Container/Bulk cargo is a key risk. 2. Expansion faces hurdle: The National Green Tribunal has asked Ministry of Environment and Forests to review the environment clearances accorded to the proposed expansion plan at Pipavav Port. However, management has clarified that this would not affect the current operations of the company and would not result in cost overruns. P age |3

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Financials

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Profitability (Rs. In Cr) Revenues % change EBITDA EBITDA margin (%) Depn & Amort Operating income Interest Other Income PBT PBT Margins (%) Extraordinary items Tax PAT EPS Quarterly (Rs. In Cr) Revenue EBITDA Depreciation Op Income Interest Other Inc. PBT Tax PAT PAT Margins % EPS Performance Ratios EBITDA margin (%) PAT margin (%) ROE (%) ROCE (%) Valuation Ratios Price Earnings (x) Price / Book Value (x) EV / Sales EV / EBITDA Per Share Data Reported EPS BV per share Cash per share Dividend per share

CY09 220.7 31.9% 50.3 22.8% 45.8

CY10 283.9 28.6% 114.4 40.3% 49.3

CY11 395.9 39.4% 181.7 45.9% 55.8 125.9 85.2 16.1 56.8 14.3% 0.0 0.0 56.8 1.4

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CY12 416.0 5.1% 181.9 43.7% 54.9 126.9 68.4 15.4 74.0 17.8% 0.0 0.0 74.0 1.6

4.5 115.7 0.7 -110.5 -50.1% -5.8 0.1 -116.4 -3.5

65.1 127.1 11.1 -50.9 -17.9% -3.8 0.0 -54.7 -1.2 Mar.13 118.8 56.8 13.8 43.0 9.8 2.8 36.0 0.0 36.0 30.3% 0.7 CY10 40.3% -19.3% -10.5% 5.1% CY10 -36.5 2.5 8.6 21.2 CY10 -1.2 17.4 4.6 NA

Dec.12 94.3 33.7 13.7 20.0 17.7 5.9 8.2 0.0 8.2 8.7% 0.2 CY09 22.8% -52.7% -33.7% 0.4% CY09 -12.5 4.4 10.7 46.9 CY09 -3.5 9.9 2.5 NA

Jun.13 124.5 57.0 14.0 43.0 9.5 1.9 35.4 0.0 35.4 28.4% 0.7 CY11 45.9% 14.3% 7.4% 9.7% CY11 32.5 2.3 6.2 13.6 CY11 1.4 18.7 1.7 NA

Sep.13 126.3 61.5 14.9 46.6 9.8 7.4 44.2 0.0 44.2 35.0% 0.9 CY12 43.7% 17.8% 7.4% 9.3% CY12 26.7 1.7 5.7 13.1 CY12 1.6 25.1 1.1 NA

Financial Health (Rs. In Cr) EQUITY & LIABILITIES Share Capital Reserves & Surplus Non-Current Liabilities Long Term borrowings Deferred Tax Liabiliites Other Long Term Liabilities Long term Provisions Current Liabilities Trade Payables Other Current Liabilities Short Term Provisions TOTAL ASSETS Non Current Assets Fixed Assets Tangible Assets Intangible Assets Capital Work in Progress Non Current Investments Deferred tax Assets (net) Long term Loans and Advances Other non-Curent assets Current Assets Inventories Trade Receivables Cash and Bank Balances Short Term Loans and Balances Other Current Assets TOTAL Cash Flow (Rs. In Cr) Operating OP before WC Change in WC Tax CF from Operation Investment Capex Other Income change in Investments Total Investment Financing Change in equity Change in Borrowings Dividend paid Interest Paid Others Total Financing Net Chg. in Cash Cash at beginning Cash at end

CY09 314.9 -3.8 1055.9 0.0 0.0 32.6 78.5 74.7 0.0 1552.7

CY10 423.6 312.3 765.4 0.0 0.0 38.5 34.7 83.9 0.0 1658.5

CY11 423.6 369.4 670.8 0.0 8.9 37.2 22.5 44.3 7.5 1584.2

CY12 483.4 728.3 303.9 0.0 10.6 22.3 32.1 65.0 17.7 1663.4

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1280.3 2.7 15.6 83.0 0.0 64.5 0.0 5.2 21.7 79.8 0.0 0.0 1552.7 CY09 50.3 19.7 (0.1) 69.9 (1344.4) (83.0) 0.7 (1426.7) -30.6 0.0 0.0 (115.7) 1582.9 1436.6 79.8 0.0 79.80

1252.3 7.9 30.4 83.0 0.0 53.0 0.0 7.5 29.5 194.9 0.0 0.0 1658.5 CY10 114.4 (100.9) 0.0 13.5 4.4 0.0 11.1 15.5 108.7 (290.5) 0.0 (127.1) 395.0

1265.4 4.4 9.0 83.0 0.0 34.7 59.7 5.7 32.4 70.5 18.3 1.1 1584.2 CY11 181.7 39.9 0.0 221.6 5.4 0.0 16.1 21.4 0.0 (89.6) 0.0 (85.2) (192.6)

1242.4 3.8 157.7 83.0 0.0 43.1 16.9 11.5 41.8 51.1 11.9 0.3 1663.4 CY12 181.9 (0.7) 0.0 181.1 (124.3) 0.0 15.4 (108.8) 59.9 (355.2) 0.0 (68.4) 271.9

Source: Company data, Nirmal Bang Research

86.1 (367.4) (91.8) 115.1 (124.4) (19.5) 79.8 194.9 70.5 g e | 4 51.07 194.88 P a 70.53

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Disclaimer:
This Document has been prepared by Nirmal Bang Research (A Division of Nirmal Bang Securities Pvt Ltd). The information, analysis and estimates contained herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. This document is meant for the use of the intended recipient only. This document, at best, represents Nirmal Bang Research opinion and is meant for general information only. Nirmal Bang Research, its directors, officers or employees shall not in any way be responsible for the contents stated herein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities. Nirmal Bang Research, its affiliates and their employees may from time to time hold positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document.

Nirmal Bang Research (Division of Nirmal Bang Securities Pvt Ltd) B-2, 301/302, Marathon Innova, Opp. Peninsula Corporate Park Off. Ganpatrao Kadam Marg Lower Parel (W), Mumbai-400013 Board No. : 91 22 3926 8000/8001 Fax. : 022 3926 8010

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