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Gujarat Pipavav Port's Expansion Plans to Make It A Major Container Hub; Stock Likely to Rise

  • Gujarat Pipavav Port had a revenue growth of 33% and net profit growth of 142% during the fourth quarter of 2011. Strong volume growth and better realisations, despite a slowdown in container traffic environment, have helped it achieve this.Its container traffic and bulk cargo showed a volume growth of 20% and 18%, respectively. A hike in the refrigerated container cargo and favourable exchange rates have lifted its overall realisations by 10%.Therefore, the company could expand its EBITDA margin during the quarter by another 700 basis points to 50.9%. Manageable Maersk issues: The company's share price fell in the recent past based on concerns arising due to a pull-out by Maersk.

  • According to the MoU signed with Maersk, all its line and Safmarine ships were to use the Pipavav Port as their exclusive port of call in Gujarat from 1 April 2010 to 31 March 2012.Till now, three Maersk vessels visit Pipavav Port regularly and contribute 50% of the container volumes for the company. After the expiry of this MoU, Maersk plans to divert one of these three ships from Pipavav Port to Mundra Port as a strategic initiative.Though the space left vacant by the Maersk ship will be given out to other shipping lines, there may be a disturbance in the traffic during the second quarter of 2012, reducing the overall sales volume growth in 2012. However, reduction in dependence on Maersk will improve the company's risk profile and realisations with a 15% discount being offered to Maersk.

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