Since takeover by the multinational APM Terminals (43% stake), Gujarat Pipavav (GPPL) has witnessed a remarkable turnaround. EBITDA is up 34x in the past seven years.
But EBITDA growth will liekly taper off from 43% p.a. (CY12-14) to 23% p.a. (CY14-17) to 12% p.a. (CY17+). GPPL’s tariff growth to taper off to 6% per annum from 14% p.a. in CY12-14, in line with industry as it is now close to Mundra tariffs. We believe GPPL will focus on improvement in utilisation as its capacity expands 35% over the next 2 years
GPPL will reach peak utilization of 95% in 5 years with no capex beyond that as the concession period will end in CY28. Renewal of concession at similar terms is not guaranteed. In our view, takeover by government or aggressive bids by competitors is a possibility post 2028.
We believe CMP is factoring in more than cash flows from full utilisation of current and planned capacity. While scalability is not an issue, we believe massive value accretive capex is unlikely. If next round of capex starts by CY18, GPPL will have 8-9 years to reap benefits. In case of renewal of concession, terms may be less lucrative.