We reiterate our ‘buy’ rating on Gujarat Pipavav Port with a revised target price of R75 per share (earlier R62) on reasonable valuations (9.3x CY14e EV/Ebitda), strong operations, high rail proportion fending away competition from Hazira, medium-term visibility once capex gets completed and strong growth/profitability from PRCL.
We revise our CY13e and CY14e EPS estimates to R3.7 and R4.9, respectively (earlier R3.7 and R4.3).
The company has recorded a strong scale-up in container volumes over the past 3-4 quarters and the quarterly run rate is back to the 160,000-165,000 TEUs mark (similar run rate of volumes prior to shift of the two Maersk lines).
We believe this quarterly volume run rate is sustainable with full impact of new added lines (over the past 2-3 quarters) and a ramp-up in volumes of existing lines. We build volumes of 6,39,000 TEUs in CY13e and 7,35,000 TEUs in CY14e for Pipavav port, which presumes a market share of 14-18% for Pipavav port of the incremental volumes calling at west coast ports. We note that majority of the top global container shipping companies make a call at Pipavav port and, hence, this market share would be achievable.
Pipavav port has received the environment ministry’s nod to go ahead with port expansion plans. The port is not set to proceed with its capex plans and is likely to meaningfully start incurring capex in CY14e (project delayed by about 6-9 months due to the clearance issues).