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Edelweiss
Gujarat Pipavav (Buy)
CMP: ₹145.90
Target: ₹160
Gujarat Pipavav Port is engaged in the business of port development and operations at Pipavav Port. The company’s Port Pipavav is located approximately 150 nautical miles from Nhava Sheva in Mumbai.
Gujarat Pipavav Port’s (GPPV) Q3FY18 numbers indicate sustained pressure on realisations (down 8 per cent y-o-y, 1.5 per cent q-o-q) owing to pricing pressure from neighbouring ports. Key highlights: 1) revenue declined 4 per cent y-o-y even as volumes grew 10 per cent plus; and 2) new Maersk service line for Far East started making port calls from mid-Jan 2018 and is likely to add 80,000, 90,000 TEUs.
Though management remains optimistic on volume recovery, it maintains a cautious stance on pricing pressure. Dividend yield of about 3.5 per cent and being a net cash company pare the risk to business to a large extent. Moreover, GPPV could be a potential buy out target, which could keep the downside limited. Maintain ‘buy’.
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