Gujarat Pipavav Port Limited - Review

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Unicon Wealth has the following recommendation on the IPO,

At the lower price band, GPPL is valued at 4.3x its P/BV and 4.9x at the upper price band. Mundra Port on the other hand is available at 100% premium as it’s already profit making company and has positive (16%) return on its net-worth. Though GPPL is a loss making company, on the back of traction from rising global trade, rapid industrialization in the state of Gujarat and strategic location of the Port, we believe, rise in cargo handling and lower interest out go would prove to be a turn around case for GPPL and investor can Subscribe to the issue with Long term horizon.

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Angel Broking Analysts - Param Desai and Mihir Salat have the following views on the public issue of APM Terminals' Pipavav Port,

At the lower band of Rs42, GPPL trades at a premium to its global peers at 2.5x CY2011E P/BV v/s 2.0x 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. On the domestic front, the company is trading at a substantial discount to the Mundra port, which trades at 5.9x FY2012E P/BV. We believe that 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% discount is unwarranted. Hence, we recommend Subscribe to the IPO at the lower price band with a long-term perspective.


In a separate Note, Quant Capital Analysts - Krishnakant Thakur and Pawan Parakh recommends to AVOID the IPO because,

Based on our DCF valuation (Costofequity at 13% and no terminal value beyond 2028)we arrive at a price of Rs37 per share. Considering the price band of Rs42-48 we recommend AVOID rating for the issue.

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HSBC has the following Views on the IPO,

Gujarat has been able to maintain a market share of approx. 76% of the traffic at all non-Major Ports in India. Traffic at non-Major Ports in Gujarat has grown at a CAGR of 16.2% since 2005 and Gujarat has been able to maintain a consistent market share of approx. 20% of the growing traffic handled at Indian ports. Gujarat is expected to handle 244 MT or 28% of India’s total throughput. The western region ports in Maharashtra and Gujarat serve the northern outlying region market and 30% of the cargo throughput of the Gujarat ports is for the north which is expected to increase in the future. GPPL is well positioning itself to leverage upon the opportunity from increasing volume growth at Gujarat.

GPPL is valued at ~15x CY11 EV/EBIDTA, as compared to valuations of 17x-18x EV/EBIDTA for its peers like Mundra Port. With its strategic locations we expect strong volume growth in container traffic and bulk cargo, driving strong revenues growth in coming years. With the loan repayment from the proposed IPO funding, the company would also minimize its finance costs which would aid turnaround over next 2-3 years. Considering the future growth  prospects,  we believe one should subscribe to the issue.

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Aditya Birla Money has the following recommendation,

At the offer price of `48, GPPL would be discounted at 2.5x P/BV post IPO. The only comparable within the listing space is Mundra port which is almost 7x the size and is currently valued on earnings. The infrastructure set-up has already been done for GPPL and the business is seeing good traction now. Moreover the strategic location of the port coupled with a solid parentage provides us confidence on sustainability of the business model and the growth prospects of the company. Valuations appear a bit stretched but then a quality paper would warrant some premium. Looking from a tactical perspective, we do not expect significant listing gains and therefore advise only very long term investors to subscribe to the issue.

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Edelweiss has done some good number crunching and has arrived at a DCF price of Rs 56 / share on Gujarat Pipavav Ltd and hence the recommendation,

At the upper band of INR 48 the issue is priced at 15.2x CY11 and 10x CY12 EV/EBITDA. With huge opportunity in the port sector, strategic geographical presence, improved capacity, strong parentage and operating leverage to kick in, we believe the stock can command premium to the current valuation. We have followed DCF approach to arrive at our fair value of INR 56.5, indicating a potential upside of 18%.

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Sushil Finance Analyst Sanket Shahs recommends to SUBSCRIBE to the issue,

Non-major ports are expected to witness a higher growth in cargo traffic as compared to major ports, owing to higher utilizations at most major ports. We believe that investment in port sector is a long term bet due its capital intensive nature. Having already invested in the infrastructure we believe GPPL is well placed to capture the forthcoming growth in the cargo traffic. Thus, we have assigned a B+ rating and recommend our investors to subscribe to the issue.