Gujarat Pipavav Port: good results priced in
Gujarat Pipavav's shares capture the upside
The party continues at Gujarat Pipavav Port Ltd. The company’s March quarter financial results, announced on Tuesday, were far better than expected.
Decent growth in volumes for container and bulk and general cargo meant that revenue increased by 25% year-on-year in the March quarter to ₹ 156 crore. Container cargo volumes were helped by organic growth and additional services, while bulk volumes were driven by higher coal volumes.
Operating profit margin improved substantially by about 13 percentage points over the same period last year to 58.6%. Operating margin was slightly higher compared with the December quarter as well. Operating performance was healthy in the March quarter despite higher employee costs (due to salary increments and bonus payments) thanks to a decline in operating expenses. Operating profit thus increased by about 61% to ₹ 97 crore.
A decline in finance costs meant that net profit growth was slightly faster. Net profit rose by 72.5% to ₹ 61 crore in the last quarter.
The strong March quarter results have led to analysts upgrading their earnings estimates. The only problem, as far as investors are concerned, is the fact that Gujarat Pipavav’s shares capture the upside. Since the results, the stock has gone up by 10% to about ₹ 99. In fact, the stock has gone up slightly more than two-thirds (67%) since it’s low in 2014. The stellar performance naturally means that the outlook on valuations is less bright.
“We believe the strong stock rally over the past six months has pushed Gujarat Pipavav into expensive territory," pointed out a results note from Nomura Global Market Research. “With the bulk of positive surprise led by volume growth on a weak base, margin turnaround and tariff hikes now behind the company, we see limited upside triggers for the stock in the near term."
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