Angel Broking is of the view that the initial public offer (IPO) of Gujarat Pipavav Port Ltd (GPPL) is expensive but with substantial growth potential, can be subscribed at the lower end of the price band. The company has fixed a price band of Rs 42 to Rs 48 for the IPO, mobilising around Rs 500 crore. The IPO opened for subscription today.
"We recommend subscribe to the IPO at the lower price band with a long-term perspective," says Angel broking in a note released on Monday. We believe that GPPL is well-positioned to attract incremental container traffic given high capacity utilisation and port congestion at JNPT, it adds.
On the valuations front, the broking entity is of the view that at the lower band of Rs 42, the company trades at a premium to its global peers at 2.5 times CY2011E P/BV versus 2 times respectively.
"We believe that GPPL comes off a low base compared to some established ports and to that extent the growth should command a premium," it explains adding that on the domestic front, the company is trading at a substantial discount to Mundra port, which trades at 5.9 times FY2012E P/BV.
According to the brokerage, GPPL's discount to Mundra port is justified given the latter's larger scale of operations, revenue from its SEZ and higher profitability growth. However, given GPPL's high growth potential we believe that the 57 per cent discount is unwarranted, it adds.
