We maintain ?hold? on Gujarat Pipavav Port with a target price of R50 per share. At the current price, the stock trades at 11.4x CY13e and 10.2x CY14e EV/Ebitda. We have also revised our PAT estimates up 11% each for CY13 and CY14 on change of our $/INR assumptions (R55 to R58 for CY13; R53 to R56 for CY14).
The company has proposed revision in port tariffs, effective August 16, a year after dollarisation of container tariffs. Terminal handling charges for road containers have been raised ~15% (across loaded and empty containers for both 20 ft and 40 ft containers) and all containers arriving at and departing from the port by rail will be charged port infrastructure development fee (new)?$6 for 20 ft and $12 for 40 ft containers. The revised tariff is broadly in line with our 3% tariff revision assumption during CY13.
Further, marine charges (includes port dues, pilotage, berth hire charges, etc) have been tweaked and a few new charges have been introduced (not very significant).
Since ~70% of the total volume handled comprises containers (40%:60% ? road:rail split), we estimate the total increase to be ~7%. However, the company stated that the increase could be only ~4% as most of the tariffs are negotiated with liners and the tariff card carries rack rates, which are benchmark prices.
A weakening rupee is icing on the cake. After dollarisation of container revenues, a weak rupee will favourably impact realisation.
