Credit Suisse downgrades Gujarat Pipavav to underperform

MUMBAI: Credit Suisse has downgraded shares of Gujarat Pipavav Port to underperform from outperform and cut target price to Rs 155 from Rs 195 due to lacklustre container trade data in the second quarter and increase in risks to business.

"We appreciate merits of strong corporate governance, cash flows and start of dividends but core business is coming under pressure and that drives our rating cut," the brokerage said.

The brokerage firm has cut earnings estimates for FY17, FY18 and FY19 by 8%, 14% and 16% as risks to business has increased as a result of these recent developments.

"Container traffic at major ports in 2Q remained weak with a flat number on a YoY basis. Same is the case with rail container data also which is weaker sequentially (from 1Q) in YoY growth terms. This data set suggests continued weakness in trade," said Credit Suisse in a note.

Credit Suisse said the brokerage has lost ground on two counts-the Hanjin bankruptcy and the Hyundai CIX service drop.

"Both these lines may need to be reorganised and create volume uncertainty at Pipavav. GPPV has 13-14 lines calling every week, doing volumes of 14,000-15,000 per week.," it said.