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Earnings Call Analysis
Q2-2024 Analysis
Gujarat Pipavav Port Ltd
Gujarat Pipavav Port Limited (GPPL) celebrated a remarkable Q2 FY '24, setting a new record with an operating profit of INR 150 crores, the company's highest-ever EBITDA for a single quarter. This stellar performance translated into a significant year-on-year net profit increase of 52%, alongside impressive margins that reached 60%.
Girish Aggarwal, the Managing Director, detailed the sources of this success. GPPL saw growth in all segments, with container volumes soaring by 16% year-on-year, while liquid volumes, powered by LPG, surged 52%. Remarkably, Roll-on/Roll-off (RORO) volumes leaped by 139%. In tangible terms, the organization's overall revenue rose by 12%, EBITDA by 25%, and net profit saw a 5% uplift from the previous year. Quarter-on-quarter metrics also indicated robust growth, with notable increases across all categories, including an 8% rise in container volume and a 40% spike in RORO volume.
During the earnings call, inquiries emerged concerning the sustainability of the expanded margins. Santosh Breed, CFO, confirmed that the surge hinged on year-on-year and quarter-on-quarter escalation in volumes, particularly freight from EXIM (Export-Import) activities which yield higher financial yields. In the light of consistent volume increases contributing to revenue, Breed suggested that it is reasonable to anticipate maintained margin levels, provided the business conditions remain favorable.
Management addressed queries about the progress of insurance claims related to Cyclone Tauktae damage in 2021. Breed disclosed that the company is still settling the full amount and anticipates a conclusion in the first quarter of the calendar year '24. Continuing the discussion on growth, Breed projected ongoing progress in the LPG segment after a 74% volume hike this quarter, thanks to a new Very Large Gas Carrier (VLGC)-compliant jetty. The company expects to reach near capacity in the LPG business with volumes of approximately 1.2 to 1.25 million metric tons this year, and fully utilize their capacity of about 1.3 million metric tons in '24/'25.
Looking ahead, Breed revealed plans to build an additional liquid jetty with an investment of USD 90 million, subject to appropriate approvals. This expansion is slated for completion around mid-2025, setting the stage for enhanced capacity and business growth. Additionally, there were discussions regarding the concession extension beyond the current end date of 2028, with Breed expressing optimism and noting that there have been no negative signals from government stakeholders, though a definitive timeline remains uncertain.
Analysts showed particular interest in the company's ability to maintain double-digit growth in container volumes. With GPPL's management emphasizing the potential challenges foreseen by shipping lines in '24, the firm's strategy seems to focus on leveraging opportunities this may present. The company appears positioned to monitor market developments closely over the ensuing quarters to harness prospective growth avenues.
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Hello, and good afternoon, everyone. This is Manish Agnihotri from Gujarat Pipavav Port Limited, and welcome to the earnings call of Q2 FY '24.
In the company, we have Mr. Girish Aggarwal, Managing Director; and Mr. Santosh Breed, CFO. We will start with the opening remarks from Mr. Aggarwal, and followed by financial numbers by Santosh, and then we'll open up the floor for the questions.
So over to you, Girish.
Good evening, everyone. GPPL reported an excellent quarter. We reported an operating profit of INR 150 crores. This is the highest-ever EBITDA recorded in a quarter so far. Overall, net profits year-on-year were higher by 52% and margins for this quarter was 60%. This was fueled by growth in volumes across the board.
Container volumes year-on-year were higher by 16%. Liquid, 52% higher, largely because of the LPG volumes, which was 74% higher. The RORO volume was 139% higher. Overall, revenue was higher by 12%, EBITDA higher by 25%, and as I said, net profit higher by 5%.
Even quarter-on-quarter, we showed significant growth. Volume of container quarter-on-quarter was higher by 8%; bulk, higher by 15%; liquid, higher by 21%; and RORO, higher by 40%.
So overall, an excellent quarter from a business perspective. Based on the results, the company has announced an interim dividend of INR 3.6 per share, aggregating about INR 174 crores. This is the highest-ever interim dividend that we have declared so far. Thank you. Santosh?
I think the key financial numbers were well covered in the opening remarks by Girish. So I think let's jump to the question directly.
Okay.
Okay. again, please raise your hand for the questions, and then we can take it one by one. Aditya, go ahead.
Sorry, if I missed this. If you covered it in your opening remarks, the uptick in margins and probably a 1Q, 2Q interchain. I wanted to check whether one shouldn't be focusing more on [indiscernible] numbers over here? Or is there something on the margin side in [indiscernible] that you would want to highlight as to why there were so strong?
Sorry, if you didn't see the numbers. As Girish mentioned in his opening remarks, all our business streams has done well year-on-year as well as quarter-on-quarter. And on the container business, mainly the volume uptick is driven by the EXIM volumes, which gives higher serialization. So all these cumulative upticks have helped to improve the margins.
Going forward, of course, we believe liquid and the RORO business will do good, will continue to perform. Container, of course, we need to really keep on monitoring. The overall input coming from the shipping line for '24 is that going to be a challenging year for them.
But we also see that, that should also create opportunity for us as well. So we had to really monitor this for the next few quarters, how the volume develops per shipping line and then what's the opportunities for us out of that.
And the implied realization for the quarter gone by, is it just reflective of mix impact? Are there any changes to the price points? Not change at all?
There's no change in the price line. That is purely the mix -- the favorable mix, what we are seeing.
Okay. So the way I assessed -- the way you are assessing the margins for the quarter at 60%, a reflection of broadly stable pricing and change in mix. And if growth was sustained at [indiscernible], you will see these kinds of margins incrementally as well.
That's right.
Okay. I also wanted to check, have there been any new line additions that have happened in the quarter gone by for the incremental quarters?
In the service added during the quarter?
No. There was no additional service added in this quarter.
Priyankar, go ahead.
So sir, the first question is -- so regarding -- let's say, what I see is that this is the first quarter you have received certain insurance claims. I don't think it had happened earlier. So can you guide us where are we in the process? And what sort of claims can we expect, let's say, in the coming quarters? That's the first one.
Yes. So the insurance claim, what we see right now is, of course, a part payment towards our claim. But we also had received the claims in the earlier quarter as well -- last year as well. So this is not the first time. We are still in the process of finalizing the full and final amount for the damage that happened during Cyclone Tauktae in 2021. And we expect that full and final claim to be settled somewhere in the first quarter of the calendar year '24.
Okay. Sir, and furthermore, on the LPG side, so I understood that you had made this VLGC-compliant jetty, and there was a further potential of expansion of volumes. So how are you seeing the traction over there? And what sort of ramp-up trajectory do you see, let's say, going into the next year as well?
Yes. So LPG volumes year-on-year for this quarter was higher by 74%, partially because of the VLGC-compliant jetty, which happened in the month of August. We believe the growth on LPG will continue.
For this financial year, we're looking at a volume of about 1.2 million to 1.25 million metric ton, which is very close to our capacity versus the mix that we have. And we believe that we will continue to max out our capacity in '24/'25 as well, which is roughly 1.3-odd million metric ton.
Sir, any capacity additions beyond that?
Which we have announced, Priyankar, this was announced, I think, in Q1, if I'm not mistaken, or Q4, which is an additional liquid jetty USD 90 million of investment, subject to regulatory and statutory approvals. We expect that is all going fine. We expect that mid-28 25, we should have a new jetty ready.
Just squeezing just one last question. So can you -- so like in -- so can you just help us with where are we in relation to concession extension? Any discussions on that front? So that's the last question from my end.
We continue to engage with the relevant stakeholders, Priyankar. And again, I just want to say that we are seeing no red flags. It is, of course, to the government -- it is, of course, left to the government to announce their policy or anything on the concession extension for us.
We still hold a concession until 2028. There is still some time to go. But in all my personal discussions with the government authorities, the relevant stakeholders, we don't see any red flag. So -- however, the time line is difficult to state.
Mr. Vipul Shah. I think Mr. Shah is not around. [indiscernible], can you go ahead with your question?
Sure. So I also wanted to get a sense that -- from a continued growth. So you talked about liquid, but could you throw some light on the prospects of you growing in containers at, let's say, a double-digit pace? I think you did highlight near-term weakness. Maybe if you could give us a more near-term and 1 year overview on how you think for the container business?
Yes. I think we are cautious on the container growth. Whatever we are hearing from a market perspective, 2024 overall, looks like a tough year for the shipping lines versus the overall global environment. So it's difficult to give a number.
Right now, I think we are watching this closely. And we'll get back to you over the next 2 quarters in terms of how the volume development happens. Again, needless to say, we are working with multiple customers and shipping lines to try and improve our throughput as much as possible, but we have to be cautious on the container volume growth.
It's very tough to say how much that impact will be at least at this point in time. So I think [indiscernible] just hold off on that, and then maybe we have a better answer for you either next quarter or when we announce our annual results.
Sure. Again, maybe a question on container's 1 year overview. You would see JNPT getting connected to the GST. [indiscernible] how soon before that event do -- does the trade start thinking through whether the opportunity port for them is inside Gujarat or the JNPT? Any views you have to share on that front?
There are two points here. One, there needs to be space in JNPT. JNPT is practically full, if you look at where they sit today. Second, we must look at the distance between the Northern Hinterland and JNPT vis-a-vis the distance between the Northern Hinterland and us or Mundra, right?
So clearly, moving cargo on DFC or otherwise, will attract higher tariffs, rail tariffs for goods moved from the Northern Hinterland to Nhava Sheva. So there are two challenges that I see. One is the cost of movement from the Hinterland. The second is space itself in Nhava Sheva.
So -- while I think DFC is the right way to go and Nhava Sheva will be connected. I would be very doubtful that we'll see movement of cargo into Nhava Sheva. Simply because, honestly, I would take it the other way around. We are now connected to DFC, while Nhava Sheva is not. So we could potentially see movement of North Gujarat, South Gujarat volumes, which traditionally go to Nhava Sheva come to us. So I think -- I'm not worried about DFC and Nhava Sheva connection.
And just one more data point. If you could share -- one of your logistic service provider on the [indiscernible] trend suggested that the meaningful part of whatever lease support today and goes towards a modern Internet actually lies on the railway itself at this point of time.
Just trying to get a sense whether this would be an accurate judgment because it then puts into question what benefits would DFC eventually bring inside?
I'm just trying to get your question. You will have to repeat. You're not very clear. What is the logistics provider said, sorry?
Could you give us a sense that of the cargo that comes to the Gujarat ports, including yours and move in Northern Hinterland, how much is already plying by rail? And how much is sales going on road to the Northern Hinterland?
So our rail corporation is roughly anywhere between 60% and 65% added there. And most of that, if not all of that, comes from Northern Hinterland only.
Mr. Vipul Kumar, can you please go ahead?
Sir, you had -- regarding -- in your opening remarks, you said that expansion of margin is due to change in mix. So can you give more color regarding the change in mix during this quarter?
So Vipul, the change in mix, which what we referred was mainly in our container business, where we have done more of the EXIM volumes of the growth, which is coming on year-on-year basis is mainly driven by the EXIM volumes.
And that's the reason why we see a better realizations and better margins from the container business. In the past calls also, we have mentioned that EXIM gives us the highest realization as compared to the coastal and the transhipment volumes that we handle. So that's the favorable mix, which I was referring to, which has helped to improve the margins.
Okay. Can you quantify EXIM mix in this quarter?
We don't really split the volumes between EXIM coastal and transshipment. So what I can probably share with you is an overall percentage. So roughly an increase of 22% year-on-year in EXIM volumes.
Okay. That's really helpful. And sir, since we have reasonable cash on balance sheet, any inorganic opportunity you are looking at? Your thoughts will be really helpful.
No. I mean if you say acquisition, if that's your question, we are not looking at EXIM at this point in time.
The focus, Vipul, is to grow at LP power, and that's why we announced the investment of INR 720 crores into liquid birth. And we still have a lot of opportunity to grow with LP power itself. So that's our current focus.
Mr. Niklas Banker, please go ahead.
Sir, first up, can you give us the LPG volumes? Exactly how much it was out of 310 kilotons of liquid?
Actually, we don't really split the liquid volume between LPG and non-LPG. What I can certainly share as a percentage of growth -- if you can just give a minute to me, I will share that with you. So on a year-on-year basis, as Girish also mentioned in...
74, I think you mentioned.
The LPG volume has grown almost 74%.
Okay.
Sorry.
Okay. And sir, also on the bulk volume, the bulk volume has reduced almost half, it has become. And the coal volumes are also down despite the power demand being higher. So any specific reasons around it?
Yes. I mean, year-on-year, the bulk volumes are down by 40%, as you rightly point out. But that's essentially because the previous year we were handling bulk for the UltraTech cement plant, which is nearby. Because their jetty was under repair, post-cyclone damages, which henceforth has now been fixed, and that volume has shifted back to their jetty.
Okay. Okay. Sir, one last [indiscernible] Sorry, the [indiscernible] contribution from PRC has substantially increased to 45 million in this quarter as compared to Y-o-Y. What exactly is the reason, sir, volume increase? Or have we gotten any tariff hike?
No single tariff hike per se, but it's the volume. As you see the volume that has grown in the port, that has corresponding impact also on the PRC because I know as Girish also explained that the coefficient what we have on the rail is almost 60% to 65%. So those volumes, which goes on the PRC also helps them in improving their revenue. PRC, of course, the cost, if you look at it, a significant part is fixed. So any increment in volume certainly helps in improving their profits.
Okay. So as the container volume grows, should we expect the PRC contributions increase as well?
Absolutely. That's right.
Okay.
So we [indiscernible] liquid -- in the LPG moves on rig, so that is also helping them, and even the fertilizer volumes.
Achal, please go ahead with your question.
Yes. Just to clarify, you mentioned 22% EXIM growth Y-o-Y. Have I understood right, for the second quarter?
Yes, that's right.
And can you help us understand what has driven this? Is that any service line addition, any particular geography addition, or simply the wallet share gain?
As compared to last year, if you remember, earlier quarter narrative, we had mentioned about addition of some services. So we had added a service to Far East and Middle East. One was Shaheen, which was for Middle East, which is the most aligned service. And then there's another service [indiscernible] for Far East. So those volumes have been ramped up now, and that's why we can see the impact of those volumes in the current quarter. Apart from that, even other services are doing good as compared to last year.
Understood. Understood. So is it possible to quantify these two lines? How much would they have added incrementally for the quarter?
Sorry, actually, I don't think we're able to give those details.
No problem. No problem. Secondly, in terms of the pricing, what has been the pricing for the quarter for container, coal and container bulk?
And so pricing-wise, the range has remained the same. If you look at the relation, 7,000 to 7,900 has been broadly the range for the container port, which was given in the earlier quarter. And same thing with bulk and liquid. So we've not taken any price change in the current quarter.
Right. Okay. So container 7,000 to 7,900, so approximately, let's say, 7,400 to 7,500. How does that stack up versus Mundra and JNPT terminals?
So I think we are very...
We are in no position to answer that question.
Yes, that's right. So what we can certainly answer on the tariff level, right? So tariff level, we are -- I think we are very competitive with the ports, Mundra, [indiscernible], JNPT.
Okay. Understood. Another question I had, one of the answers you mentioned that JNPT is congested or fully utilized or something, right? Have I understood right? So is that on the yard front? Waterfront? Where do you see the blockage actually?
Because we were under the impression that JNPT is seeing significant capacity addition by PSA. So the yard side capacity or the waterfront capacity won't be a challenge. Is that right?
In future, right? So you're right, BMCT PSA is coming up with a 2.4 million TEU capacity, but that's going to come online '25 or '26. The JNPT, which is now the NSFT terminal CMS CGM, they are also going to increase their capacity. But I'm talking just current, right?
So there is this capacity constraint. Broadly, I think there are today would be about a 7 or less than 7 million or 6 million -- 6 to 7 -- 6.5 million TEU capacity, which broadly will be full today.
Okay. Okay. But -- I mean I think the question was also with respect to the JNPT-DFC connection. So eventually, this capacity will come in, right? I mean that's the -- if we make that assumption, does that impact us?
I know you mentioned about the cost and the time -- the distance part of it. But is it possible that some of the lines, which are calling us, may actually call only JNPT and not us anymore? Could that be a possibility?
Everything is a possibility. Honestly, Achal, but I would like to believe in the possibility that they will start calling us only and not JNPT, right? So there's no reason for me to believe that we are worse off than JNPT.
And as I said, from an Hinterland connectivity perspective, we are significantly better and significantly cheaper than JNPT. So there is no reason for me to believe that the coefficient of rail, which is 14% in JNPT, will suddenly start to jump up. I really don't see that possibility.
And by the time they will be up and running, we would be dearly fully entrenched in utilizing the DFC. So I think we have the first-mover advantage, and that will continue.
There is also one additional factor, right? Because when we look at the capacity, one is, of course, the waterfront. Second is the yard. And third is the railhead as well.
So when you look at JNPT, the railhead, which is there, is a shared facility between the terminals. So that also acts as one of the challenge on handling the rail volumes. And today, JNPT is anyway catering to the central India, and Maharashtra market, which itself is utilizing the capacity in full. So that's another factor.
Fair point. Fair point. Sir, if I may ask just a very simple statistical question. How much -- of our total liners or customers, how many of them are calling both JNPT and us?
There are several. There are several.
Would you know the percentage as to how many of the vessels or the container?
I don't have a percentage, but [indiscernible] has two services. They call both JNPT and us. We have a MASS service, which calls both JNPT and us. We have the OOCL service, which calls us and JNPT. So there's quite a bit of sharing between JNPT and us.
Deepak, can you please go ahead, Deepak Maurya.
So Girish and Santosh, I had a question around the services. You mentioned previously that the two services to the Middle East and the Far East are now fully ramped up. Just want to understand if there are any other services which are yet to be fully ramped up? Or how the services that we had are now almost fully operational? And -- so the growth going forward would be driven by the underlying growth in those regions rather than a service ramp-up?
All are fully ramped up now.
That's right. That's right.
So what I mentioned was about the new services, which were added. And the new services, generally takes some time to fully ramp up, right? So that's why we see this increased volume.
Having said this, again, all the services -- existing services, right, they always look at opportunities to add more volumes for this -- for their slots. So that -- we've also seen some organic growth on the existing service as well, and we hope that will continue.
But as Girish mentioned about the calendar year 2024, the indication coming from shipping lines look quite challenging. So we have to wait and see how the performance continues in the coming quarters.
And then a follow-up to the same service question. With the ramp-up of these two services, how is your split between, say, at one level on the export/import, the mix? And at the second level, by region, like which regions are now -- if you can give some color of like by geography or by region, how much volumes of your export/import are directed like Far East versus Middle East versus in your region for that matter?
So in terms of the import and export, roughly around -- it is in the range of around 65-35 ratio of what we have. Most of the imports -- so 65 for the imports -- and most of the imports are Far East-based. And of course, the narrative which also was saying about the overall -- the global implication what we are seeing at a shipping line on the volumes is mainly driven by export because of the U.S. and the Europe economy where we see some demand challenges.
And that's why we still believe that our support where we have been mainly an import-heavy port, and India story has been strong so far. We believe that we will still have some opportunities in 2024 to continue with a good volume performance.
Of course. And a second question which I had was around the LPG CapEx. If you could also provide some color on how much has already been spent? And for the remaining sums to be spent, what is the time line?
So we are at a very initial stage of this project, where it's been -- the initial studies and initial designing has been done. So there's a very minimal spend as of now on CapEx for this project. So most of this will start happening somewhere in '24.
'24. And what would be the time frame, like 18 months or 24 months?
Yes. So as I said, I mean, the expectation is that we are able to complete this by mid of 2025, subject to timely, statutory and regulatory approvals, which are still work in process.
Okay. And then one final question which I had, if I can, is on the concession [indiscernible]. You did mention that we had some discussions. But just wanted to understand, what is spending from your side or from the government side, the next steps before a final decision could be taken?
No, there's nothing pending from, I guess, our side for sure. I mean it is left for the government how they want to approach the concession, right? So -- I mean they will come out with the process themselves. It's not fair for me to comment on how the government wants to approach this.
No, I just wanted to understand if there are any steps or any procedural aspects which are still ongoing? That's it.
They must be at the government level.
Mr. Kunal Kokas, please go ahead.
Okay. My first question was about the [indiscernible] line, that is [indiscernible]. I wanted to know if we will have sufficient capacity to cater to that, given that inspect that we are already operating at close to maximum capacity?
Yes, I mean, I think it's a good question. We expect the KGP to be ready somewhere middle to late next year. And as the as the volume starts to ramp up, I mean, we're not expecting a full ramp-up of the line immediately. The volume will ramp up over a period of time, for which the new jetty will then be online and enable to cater to that increased volume.
So I think the timing of our jetty as well as the ramp-up of the KGP should be coinciding.
Okay. So the new objective will cater to that -- the demand from [indiscernible]?
Yes.
That's right.
Okay. And my second question was about Dholera Industrial City. Are we seeing any traction from that? And like can it be a major driver for us in the future?
It's a fantastic question that you raised. We believe strongly that Dholera SIR will be a strong driver of growth to start with project cargo as new factories start to come up. And then we will be the natural port of choice as we are the closest as we -- as production ramps up at that place. So we are very quite hopeful in the medium-term Dholera SIR will be another area of growth for us.
Understood, sir. And my third question was about the concession release.
Sorry.
About the concession. So say it does not get approved further, so what kind of replacement value are we building from the business?
Yes, we're not working on a scenario that this will not get approved, honestly. So there's no replacement value discussions that are happening, at least at this stage in the company.
All right. And just last question from my side, sir. After [indiscernible] of this new jetty, what kind of margins are you looking at? Will there be the same as before?
Sorry, after the?
[indiscernible] of the new jetty.
The margins, we expect to maintain the margins going forward as well.
Mr. [indiscernible], you have any questions?
Mr. Vinay Jain, you can go ahead with the question.
I have just one question on the other expenses, please. So a couple of quarters back, you had mentioned that there has been an increase in the insurance premium, which you are paying on a quarterly basis. But somehow, if I look at the Q-on-Q, there has been a decline in the other expenses. So if you could maybe just explain or maybe some -- throw some light on this would be really helpful.
Yes. So your observation has been right there. So what we have been doing, so the other expenses also includes our power charges and what we have been consistently working on how we can improve our power source to green. And by virtue of that, also get a reduction in our power bill.
So the two initiatives, one, we've taken, one, we already mentioned earlier, which was about the solar system being installed inside the port. So that certainly is helping. And then we also entered into some power purchase agreement through green sources that are also helping to reduce the overall electricity bill.
Apart from that, the earlier quarter also had some repair and maintenance cost, which is more of a preventive maintenance for the equipment, which is, of course, not there. So that's the key divisions what you see in the other expenses.
So this INR 35 crores is a normalized expense, or certainly one-off [indiscernible]?
There's no one-off. Definitely, no one-offs.
Anybody has any questions? Yes, Mr. [indiscernible], please go ahead.
So what will be the payback time for this upcoming LPG JT, sir?
I think -- I don't think we'll able to share all those details because these are based on a lot of internal assumptions and projections. So I don't think we're able to share the detail.
Aditya, you can go ahead with your question.
Sure. I just wanted to clarify that, from a royalty perspective, from what I recall, there is a part royalty and a full royalty, and the full royalty hits you in 2029. Is my understanding correct? And can you give us a sense of the difference between these two numbers?
Sorry -- so our concession is 2028. So I don't know where this 2029 comes from.
Sorry my mistake, 2028. My mistake.
So 2028, of course, our existing concession allow us to enjoy the concession royalty because of the investment that we have made in the port. So we don't expect to move to any full royalty regime within the concession period.
Understood. So the base case is that whatever is the current share of royalty or current formula for loyalty, absolutely nothing will change. And that is how we are progressing towards it, and that's what you're suggesting, right?
That's right. That's right.
Thank you. Any last questions from anyone? Doesn't seem to be the case.
So thank you very much for your interest and for your time. and wish you all a very happy Diwali.
Thank you, everyone, and wish you a happy Diwali. Thank you.
Thank you.