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JM Financial
Gujarat Pipavav (Buy)
CMP: ₹165.50
Target: ₹180
We recently hosted the management of Gujarat Pipavav Port at a non-deal road-show in Singapore. GPPL is well placed to benefit from the upcoming smart city at Dholera, especially in bulk cargo. Management remains confident on its value proposition driving growth in container volumes, while bulk cargo will remain volatile. GPPL is currently focused on expansion programme (converting existing multi-purpose berth into exclusive container; $76 million) and expects to fund majority through internal accruals. Unlike past three years, management indicated tariff hike in the current year (typically around August) is difficult given absence of any major change in infrastructure. Management highlighted that it wants to be a dividend paying company and being an infrastructure company, it will maintain healthy debt-to-equity ratio. GPPL cannot pay out dividend at present due to its past losses (₹500 crore, as of CY13) but will start paying dividends once the losses are recouped (expected by 3QCY15).
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