Private port operator Gujarat Pipavav has positively surprised the markets with its growth in revenue and profits in the December quarter and calendar 2011.
Analysts say the company is a good play on the container cargo growth with its improved operating leverage. Even though overall container traffic grew at a slower pace, the company managed to grow traffic at a much faster pace.
Analysts say overall container traffic in western India is now gradually shifting to private ports.
Says Standard Chartered Securities, “Pipavav port continued its strong performance, with container traffic growing 20 per cent year-on-year to 0.17 million TEU (twenty foot equivalent units) while total container traffic grew slower at 4.8 per cent to 1.96 million TEU and JNPT container cargo actually declined 0.5 per cent to 1.09 million TEU.”
For the same reason, the company’s revenue for the quarter grew 32 per cent year-on-year to Rs 115 crore. Also, higher realisations in container and bulk segments pushed up the operating profit margin to an all-time high of 48 per cent. The company’s net profit grew 142 per cent to Rs 27 crore.
Analysts say while bulk cargo was strong at 0.9 mt, on account of fertiliser shipments, coal and liquid cargo remained lower than expectations.
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Analysts believe these two segments will remain volatile even in 2012.
IDBI Capital says it has delayed its volume scale-up estimate for bulk segment to CY15, from earlier CY14 on the back of tardy progress in setting of adjacent power projects. “Consequently, we cut our earnings estimates for CY12E/13E by 7.1 per cent and three per cent, respectively.” Going forward, analysts say container growth in 2012 may see container volume growth of 10 per cent compared to 31 per cent YoY growth 2011.
This is because the company’s exclusivity agreement with Maersk will end by March 2012, which will impact volumes. At present, three vessels of Maersk contribute to nearly 50 per cent of volume.
Hence, analysts have cut the their estimates of container growth estimate CY12 from 25 per cent to 10 per cent. Prabhudas Liladher says the management is currently negotiating longer term (one-year plus) contracts with shipping lines to garner higher volume commitments in order to enhance volume growth visibility at the port. Despite the concerns, analysts remain bullish on the stock.