HSBC downgrades Gujarat Pipavav Ports to 'reduce'

HSBC has downgraded Gujarat Pipavav Ports to 'reduce' from 'hold' following its September quarter result and lowered target price to Rs 120 from Rs 130.

The brokerage said that Gujarat Pipavav Ports' recurring profit was down 21% year-on-year in the quarter, primarily driven by unfavourable cargo mix, which resulted in a lower EBITDA margin and higher tax rate.

"We argue that consensus optimism for this stock is misplaced and that these results should lead to sharp earnings downgrades and act as a downside catalyst for the stock price," said HSBC.

"We cut our FY18-20e earnings estimates by 5-6%. We are now 18-26% below consensus on FY18-20e EBITDA, but we expect consensus to fall after this result," added HSBC.