Gujarat Pipavav Port's Q3FY20 results (Neutral) - Container volume remains weak
Q3FY20 result highlights
- During the quarter, GPPL reported a sharp growth in Bulk cargo volume (119% yoy to 730kt) and liquid cargo volume (27% yoy to 190kt). However, container volume declined by 8% yoy to 231k TEUs, partially offsetting the overall volume growth to 4% yoy (at 4mt in Q3FY20). RoRo volume in Q3FY20 came in at 9k units, a decline of 55% yoy primarily due to weak demand in Automobile Industry
- Average realisation in Q3FY20 was Rs487/ton, +8% yoy on account of increase in tariff and favourable cargo mix. GPPL had increased the tariff by 4% from 7th April, 2019.
- As a result, adjusted revenue grew by 13%yoy in Q3FY20 to Rs1.97bn (in line with our estimate of Rs1.96bn). EBTDA margin came in at 60% (300 bps higher than Q3FY19) resulting in an EBITDA growth of 19% yoy to Rs1.2bn (vs our est of Rs1.3bn).
- Adjusted PAT for Q3FY20 was Rs602m (up 7%yoy) which was below our estimate of Rs676m. Meanwhile, the reported PAT for the quarter came in at Rs1.2bn led by reversal in deferred tax liability of Rs601m (due to new corporate taxation regime).
- GPPL will continue with the current corporate tax regime till it utilises entire MAT credit of Rs1.6bn (expected to remain in current tax regime for another 3 to 4 years).
Key positives: Strong growth in bulk and liquid cargo
Key negatives: Decline in container volumes of 8% yoy
Impact on financials: Maintain earnings estimates for FY20E; reduce our FY21 estimates by 9% on weak container volumes; introduce our FY22E estimates.
Valuations & view
GPPL container volumes have seen muted growth while bulk and liquid volumes contributions have increased during 9mFY20. However, bulk volumes continue to remain volatile. Though the stock trades cheaply at 17.9/16.3x FY20E/FY21E earnings, we maintain Neutral rating led by uncertainty related to extension of concession agreements (ending in FY28).
Gujarat Pipavav Port Limited is an India-based company 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. The Company offers cargo handling facilities for container, bulk, break bulk and liquid cargo. It handles a range of bulk and break bulk cargo, such as coal, cement, clinker, fertilizers, steel, iron ore, agri-products, salt and soda ash. In addition, Port Pipavav handles all maritime services in-house, without any third-party operators. The Company offers maritime services, such as maritime personnel, including harbor master, pilots, control room operators, mooring crew and motor launch crew; towage, including one launch and tugboats, and port control facilities, including radar, very high frequency (VHF), Navigational Telex (NAVTEX), automatic weather station and automatic information system (AIS).
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