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Gujarat Pipavav Port jumps 11% as Emkay upgrades to buy on Maersk push

November 22
17:05 2017
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Gujarat Pipavav Port share price rallied 11.4 percent intraday Wednesday after Emkay Research has upgraded the stock to buy from hold with a target price of Rs 174 on service additions by Maersk.

“Given a healthy dividend payout policy (around 82 percent payout in first half of FY18), debt-free balance sheet, strong free cash flows (Rs 260 crore in FY17), benign valuation (11x FY19 EV/EBITDA) and return of growth in container volume, we upgrade recommendation on Gujarat Pipavav Port to buy,” it said.

After directing ME-1 from Mundra Port (now a shared service call between Mundra and Pipavav Port), Maersk Line has shifted FI3 service to Pipavav. As per Emkay’s channel checks, FI3 currently drives a volume of around 120,000 TEUs per annum at Mundra.

“The recent line additions by parent Maersk Line will aid in recouping lost volume and providing some interim relief to the port, although we continue to believe that demand imbalance at Pipavav, caused by lack of feeder cargo availability, is a structural issue,” the research house said.

In light of the recent service additions, Emkay scaled FY19 volume assumptions to a monthly average of around 65,000 TEUs, assuming zero growth in base monthly volume of around 55,000 TEUs expected to be handled in FY18.

As a result, the research house has raised FY19 EPS estimate by 2.4 percent. It also raised FY20 volume growth assumption to 10 percent YoY (earlier 6 percent YoY).

At 14:34 hours IST, the stock price was quoting at Rs 150.15, up Rs 10.15, or 7.25 percent on the BSE.

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