ICICIdirect has recommended 'Hold' on Gujarat Pipavav Port with target price of Rs 81 as against current market price (CMP) of Rs 86 in its report.

Commenting on the investment rationale, the stock broker said, ''Gujarat Pipavav Port (GPPL) has announced its modified capex plan with container capacity revised to 1.35 million TEUs from the present 0.85 million TEUs vs. earlier guidance of 1.5 million TEUs. Further, the bulk cargo capacity expansion has been put on hold maintaining the current capacity of 4 million tons (MT) and no change in liquid cargo capacity (2 MT).

Besides, other ancillary capex has also been tapered with the container yard being developed in a phased manner and number of rubber tyre gantry cranes (RTGs) with stackers being revised from eight to four. Consequently, the total cost of expansion has been revised downwards from USD 199 million to USD 76 million.

The benefits of capex are expected to accrue from Q1CY16. We believe, over the longer term, container cargo will play a pivotal role for GPPL. Besides, it has sufficient manoeuvrability to align capex to the demand scenario.

As capex is largely to be funded by internal cash accruals, debt is expected to remain restrained. Also, over a longer period with volume visibility from container shipping lines being intact and capex aligned to capture the same, we maintain our DCF based SOTP target price at Rs 81 with a Hold rating on the stock.''

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