Morgan Stanley Research has reiterated 'Overweight' on Gujarat Pipavav Port with a price target of Rs 225 as against in its report dated Nov. 10, 2014.
A combination of our preference for near monopoly assets (ports), defensive growth over the next three years, inexpensive valuation, solid balance sheet and strong parentage makes GPPL one of our top three picks in Indian industrials. Initiate at Overweight (OW). Only listed MNC among Indian ports: GPPL provides port handling and marine services for container cargo, bulk cargo, and liquid cargo. Helped by its market leadership in terms of draft, hinterland, connectivity and the expertise of its parent (AP Moller-Maersk), GPPL handled 12.8mn tons of cargo in 2013, making it India's second-largest listed non-captive port company.
Commenting on the same, Morgan Stanley, said, ''We estimate 46% earnings CAGR, 2013-16, putting GPPL at the top of our industrials coverage in growth terms. Also, 70-80% of this growth comes from recently signed long-term contracts. GPPL has negligible working capital use, has already planned 2015-16 expansion, and a conservative management that is ruling out asset addition. So, we expect GPPL's
balance sheet to improve further, especially versus infrastructure peers; it already ranks highly in balance sheet strength as of the end of 2013.
Significant global disruption which would result in a slowdown in global trade and hence GPPL's volumes; delay in GPPL's expansion, and increased competition from capacity expansions at major ports.''
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