Drop in container volumes at Gujarat Pipavav port seem to be a short term phenomenon

MUMBAI: Economic slowdown and change in shipping lines have led to a drop in container volumes at Gujarat Pipavav Port. In FY13, container volumes at the port fell by 11% to 556,000 Twenty-feet Equivalent Units ( TEUs). However, this may be a temporary trend as proximity to northwestern hinterland and ready capex would result in pick up volumes in near future.

Over the last six months, Gujarat Pipavav Port's performance was impacted by a shift in APM's container line to Mundra Port. However, new shipping lines are now compensating the loss of volumes. In addition, the Hyundai Merchant Marine (HMM) service line is set to stop its operation at Pipavav from May 2013. This will be replaced by a similar service line, Hanjin, commencing its operation from April 2013. The management expects a loss in volume of around 3000 TEUs per week due to replacement. It also expects this volatility to get neutralised in six months. Due to excellent connectivity to north-western states, the company will have any problem in getting new shipping lines to use its services.

At current market price, the stock is trading at a P/E of 24. On the other hand, Adani Ports & Special Economic Zone, which is much larger in size is trading at a P/E of 26. The current market price seems to factor the robust growth opportunity in the company.