Fundamental Analysis of Gujarat Pipavav Port: Ports are crucial for global trade as they serve as busy crossroads where goods are exchanged, linking countries and boosting economies. These maritime gateways play a vital role in international business by facilitating the flow of products from around the world.
One such company operating in this sector is Gujarat Pipavav Port. In this article, we will conduct a fundamental analysis of Gujarat Pipavav Port and look at how well it’s doing and where it’s headed in the future.
Table of Contents
Fundamental Analysis Of Gujarat Pipavav Port
We’ll begin our Fundamental Analysis of Gujarat Pipavav Port by becoming acquainted with the company’s operations and products. Following that, we’ll go into the stock’s financials. The article concludes with a highlight of future plans and a summary.
Industry Overview
With China’s economy opening up and inflation affecting Western economies, the issue of port congestion has improved, leading to a stabilisation of the global supply chain. The availability of containers has shifted from a shortage to an excess supply. Although ocean freight rates have decreased compared to the last two years, they still remain high in comparison to pre-COVID times for the shipping lines.
According to the estimates of the World Trade Organization, global trade is expected to be 1.7% in 2023, which is lower than its 12-year average of 2.7%. This decline is mainly due to high inflation, monetary tightening, and financial uncertainty. However, it is expected to increase sharply in 2024 to 3.2%.
In 2023, the container volume on the West Coast of India has seen an increase of 4% to 14.56 million TEUs from 13.95 million TEUs in the previous year. This increase is mainly due to the imports into the country. However, there has been an impact on export volume to Western countries.
Furthermore, India’s 7,516.6 km coastline which is interspersed with more than 200 ports, offers a competitive advantage for the sector in India.
Company Overview
Gujarat Pipavav Port Limited, also known as APM Terminals Pipavav was incorporated in 1992 to construct, operate and maintain an all-weather port at Pipavav, District Amreli, Gujarat.
It is the first private-sector port in the country. This all-weather port is strategically placed 140 kilometres from Bhavnagar and 152 nautical miles northwest of Mumbai, making it an important connection in international marine trade routes connecting India to other worldwide destinations.
The port has a container handling capacity of 1.35 million TEUs and a bulk cargo capacity of 4 to 5 million metric tons depending on the cargo mix. It can also handle roughly 2 million metric tons of liquid cargo.
Notably, the board of directors has approved the construction of a new liquid berth, which will increase the liquid cargo capacity to 5.2 million metric tons when completed. In addition to container and dry bulk berths, it also supports the handling of Roll-On/Roll-Off (RORO) vessels.
APM Terminals, the firm’s lead promoter, owns 44.01% of the corporation and operates a massive global network of 65 terminals. This extensive presence helps the company to support shipping lines and landside customers in growing their operations, improving supply chain efficiency, and ensuring flexibility and dependability.
Gujarat Pipavav Port – Financials
Using the annual reports declared by the company, we will now conduct a fundamental analysis of the Gujarat Pipavav Port.
Revenue and Net Profit Growth
The company’s profit and loss account indicates that the total revenue of the company had remained somewhat consistent until FY22. In the latest financial year, the company’s revenue increased to ₹967.95 crores and its CAGR growth stood at 6.68% from FY19 to FY23.
The increase in revenue can be largely attributed to the stabilisation of the sailing schedules of the shipping lines after COVID-19 and also the addition of new services.
On the other hand, the company’s net profit had declined during FY21 and FY22. But it showed a good recovery in FY23 reporting a net profit of ₹236.68 Crores. This gives the company a CAGR of 7.25% on its profits from the period of FY19 to FY23.
The table below shows the total income and net profit of Gujarat Pipavav Port for 5 financial years:
| Year | Total income (₹ In crores) | Profit after tax (₹ In crores) |
|---|---|---|
| 2023 | 967.95 | 313.14 |
| 2022 | 772.12 | 197.32 |
| 2021 | 773.86 | 221.95 |
| 2020 | 782.43 | 319.44 |
| 2019 | 747.22 | 236.68 |
| 4-year CAGR growth | 6.68% | 7.25% |
Let us now analyse the margins of the company to understand the reason behind the company’s sudden increase in earnings.
Margin Analysis
Though the revenues of the company increased in FY23, the operating profit margins have declined slightly compared to FY22. During the recent financial year, the company reported an operating profit margin of 54.76%.
The decrease in operating profit margins can be attributed to increased operating expenses of the company.
On the other hand, the net profit margins of the company have increased in FY23. During the recent financial year, the company reported a net profit margin of 31.89%.
The increase in operating profit margins can be attributed to the company’s shift towards a lower tax regime.
The table below shows the operating profit margins and net profit margins of Gujarat Pipavav Port for 5 financial years:
| Year | Operating Profit Margin | Net Profit Margin |
|---|---|---|
| 2023 | 54.76% | 31.89% |
| 2022 | 55.36% | 26.11% |
| 2021 | 57.55% | 29.78% |
| 2020 | 60.73% | 39.76% |
| 2019 | 55.40% | 29.29% |
Return Ratios: RoCE and RoE
If we take a look at the return on equity of the company, we can see that its ROE and RoCE indicate a below-average performance of the company.
While these ratios have improved in FY23, they still remain slightly below average. During FY23, The company reported an ROE and RoCE of 14.07% and 18.5% respectively.
These ratios suggest that the company has not generated good returns to its shareholders and also has low efficiency in the utilization of company resources.
The table below shows the ROE and RoCE of Gujarat Pipavav Port for 5 financial years:
| Year | ROE | ROCE (%) |
|---|---|---|
| 2023 | 14..07% | 18.50% |
| 2022 | 9.51% | 13.89% |
| 2021 | 11.03% | 14.86% |
| 2020 | 14.47% | 17.53% |
| 2019 | 10.21% | 16.17% |
Debt & Interest Coverage Ratio
The leverage aspect indicates a positive aspect of the company.
As the company has no debt obligations, the debt-to-equity ratio is not applicable to the company. This means the company is using its own funds to run its business.
Furthermore, the interest coverage ratio is also not applicable to the company, as it does not have any interest to pay. This means the company can retain more profits.
Future Plans Of Gujarat Pipavav Port
So far we looked at the previous fiscals’ data for our fundamental analysis of Gujarat Pipavav Port. In this section, we’ll look at the steps taken by the company that might benefit the company in the future.
- The company has commissioned an additional warehouse of f 10,000 sq. meters. for the storage of fertiliser in FY23.
- The company has commissioned two additional wagon loading equipment on the rail line. This will help them increase the rake loading capacity and enable faster evacuation of fertiliser cargo.
- The company has upgraded its existing Liquid berth for the purpose of handling partially loaded Very Large Gas Carriers (VLGCs).
- The company is investing in port infrastructure and waterfront development to meet trade demands. They plan to build a new liquid berth at an estimated cost of USD 90 million, pending regulatory approval. This expansion will raise Pipavav’s liquid cargo capacity from 2 million MT to 5.2 million MT.
- The car exports from Pipavav have consistently improved with the addition of new customer automobile companies. Thus, the company and its business partner are exploring new opportunities in RoRo.
- To enhance the local ecosystem around the port, the company has signed a long-term lease agreement for a warehouse at the nearby Multi Modal Logistics Park. This facility will offer warehousing solutions to local cargo customers in the immediate hinterland.
Key Metrics
We are almost at the end of our Fundamental Analysis of Gujarat Pipavav Port. Let’s take a quick glance at the stock’s important metrics.
| Particulars | Figures | Particulars | Figures |
|---|---|---|---|
| CMP | ₹ 146.65 | Market Cap | ₹ 6,869.68 Cr |
| EPS | 6.65 | Stock P/E | 20.10 |
| RoCE (%) | 18.50% | RoE(%) | 14.07% |
| Promoters Holding | 44.01 | Current Ratio | 2.36 |
| Debt to Equity | Nil | Price to Book Value | 2.6 |
| Net Profit Margin | 34.15% | Operating Profit Margin | 54.76% |
In Closing
As we conclude our Fundamental Analysis of Gujarat Pipavav Port, we can draw the conclusion that the company is well positioned to capture the growth in the sector with the help of its plans in action.
As the company already runs on high margins, the addition of increasing revenues in coming years can provide a potential for favorable growth in the future.
What do you think about the company? Let us know in the comments below.
Written by Aaron Vas
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