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Earnings Call Analysis
Summary
Q4-2024
Gujarat Pipavav Port Limited (GPPL) reported a mixed quarter. The company saw a 7% increase in revenue year-on-year and a significant 21% rise in EBITDA, pushing operating margins up by 800 basis points to 63%. However, net profit fell by 18% due to a one-time INR 52 crore provision related to an old IOCL judgment. Excluding this provision, net profit would have improved by 42%. The company also provided guidance for an expected 200 basis points expansion in EBITDA margins and a 7% increase in EBIT for the upcoming fiscal year.
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Good morning, everyone. This is Manish Agnihotri, the company's [indiscernible] of Gujarat Pipavav Port Limited. I'm joined with Mr. Girish Aggarwal, Managing Director, and Mr. Santosh Breed, CFO.
We will start with the remarks from Girish and then it will be followed with comments from Santosh on the financials, and then we will go to Q&A. Okay, Girish.
Thanks. Good afternoon, everyone. GPPL has delivered another strong quarter.
Very quick highlights. Our revenue increased year-on-year by 7 percentage points. Our absolute EBITDA was higher by 21%. Operating margin improved by 800 basis points to 63%. Our EBIT improved by 25%. Our net profit, however, declined by 18%, but that was because of a [indiscernible] approximately INR 52 crore provision that we took again for the [indiscernible] judgment that we received in our old IOCL matter, else, it would have been a 42% improvement on our net profits as well. On this judgment, we are now taking legal advice for the next course of action basis we will decide what to do, but would be prudent, we took the entire amount as a provision.
Quick highlights for the entire financial year. Our revenue was higher by 8%. Our net profit was higher by 21%. Without the provisions, it would have been higher by 28%. Our EBIT was higher by 19%, EBITDA higher by 14% and margins improved by 300 basis points year-on-year.
On an annual basis, our container volumes grew by 6% to 808,000 TEUs. Our liquid grew by 24% and RoRo grew by 141%. The Board has recommended a final dividend of INR 3.7 per share for the financial year '23, '24. Thank you.
I think all the key numbers have been covered, so unless [indiscernible].
Okay. The floor is open to questions. Mohit, please go ahead with your question.
My first question is on the -- can you just talk about the container outlook for this fiscal. Last year was pretty muted. How do you think about the next fiscal? And I think the other terminals have done better. India has grown at a better rate last year. But I think ours are muted, right? And how do you see the impact of the rates going forward?
So your question is a little unclear, Mohit, but are you asking the outlook for container.
I'm asking about the outlook for the container market and also the impact of the rate fee we're seeing? Is it abating now?
Yes. So in terms of the container market, you're right, and we kind of talked about it in the last earnings call as well, we did see an impact on our performance. We've seen this quarter, our container volumes grew by 5%, but predominantly, it was the westbound trade because of the resin impact. As we move forward in the year, we are still seeing challenges because of the Red Sea, at least from our perspective. Essentially, the transit times -- the longer transit times have resulted in shipping line changing their network and in deploying our vessels. We are seeing increased skips from various services this quarter, potentially continuing over the next quarter simply because of the tankage constraints that we see in the cities. If we get to overall quantify the impact, we believe that as we move forward, this will ease out, and we would see, again, potential growth in the container business.
Understood. My second question on the LPG terminal. Can you just update the status when we speak this capacity to get commissioned? And what is the expectation of capacity ramp-up as we move forward?
So the effect on vesting on the liquid jetties roughly of next year. So essentially, between October and December '25. That's how we've seen the time line in terms of commissioning. It's a 3.2 million metric tons jetty. In terms of capacity, it will completely them onboard. [indiscernible], then we will see how work on the growth in terms of volumes. But that entire jetty will be ready by October, December 2025.
Is it fair to share that all the evacuation pipelines, everything ready and there is no hurdle on that front?
Yes.
Understood. My last question is on RoRo, the RoRo numbers have moved up sharply. How do you charge -- so can you just give us a color on the tariff which you tariff for the RoRo?
So we have -- I don't know what you mean by that, but either -- I mean you have customer context, we don't see any share our tariffs with our customers.
Broad numbers at RoRo, how much you charge, broadly.
So basically, we have special contracts, right? And then the money services.
We don't practically give out the customer commercials. So we can't share that.
Thank you. Deepak Maurya, go ahead.
Are you able to hear me, please?
Yes.
I had a couple of questions. Firstly, on the operating expenses, that seems to be a significant decline during the fourth quarter. Could you probably provide some color on what drove this decline? And is it kind of sustainable?
And secondly, if you could also speak about the dry bulk volumes, which are down 31%. In the previous call, we discussed you mentioned that coal is something which you have for the time being, at least, consciously decided to take in or handle? May I know what is the current status on that?
Yes. So I think all the questions are related. One on dry bulk volume. The drop is mainly driven by the lower import of fertilizers. So there has been overall imports, which in the country for fertilizer. That's also reflecting in our numbers. Coal is [indiscernible]. We're going to wait for some to us when we all decide when to start that under some permission. On the operating cost, the main driver for low operating cost is a dry bulk volumes. So the handling cost for dry bulk has been lower, in line [indiscernible].
Okay. May just clarify on the coal part, you mentioned about some permissions. Could you please provide more context as to what is it that is holding you back from handling the coal volumes?
We had a conscious decision last year not to enter at coal because of certain operational sense. We continue not to add all at least for this quarter as well as next quarter and then we'll come back to say that we intend to do that one.
Okay. That is clear. And on the previous caller's question on the container outlook, you mentioned that shipping lines are skipping port calls to GPPL because of test disruptions and the erratic transit times, which are not there. So where are the volumes being handled? I mean I'm sure there are container cargoes which have to be loaded and offloaded from your hinterland. But if those volumes are not being evacuated or delivered via the services which come to your port, is it basically meaning that those volumes are not being handled or delayed?
No, it's not delayed or not being handled. You're absolutely right. So essentially, what's happening is because of the increased transit time as well as we've seen situations of weather late disruptions in China, Dubai, so a lot of shipping lines kind of do transshipment potentially at Colombo and then move out and then there's a feeder, which brings in the import cargo either from Colombo or some other shipment ports at the mainline as continue to part and catch up from the. So that's why the large scale goes. What is also, of course, that means is the export cargos are fundamentally up North can get shifted from [indiscernible], which we've seen has happened to some extent. A lot of IC cargo still continues to come to us. But in general, that's one reason for the decline of container cargo by 5% this year.
The other is that we lost the transshipment service, which is the best car service, which was a transshipment product, which we display kind of canceled and the metric change the network. And hence, that volume also doesn't come to us and doesn't go to anyone because it's a transshipment product.
Thank you, Deepak. Achal, please go ahead.
Can you hear me?
Yes.
Okay. sir, if you could help us with the realization for the quarter and for full year for container and the bulk.
Yes. So for container, the realization is in the range of around [ 8,000 vehicles 604,000 TEUs ]. And full year, it is [indiscernible]. For dry bulk, it is in the range of [ 450 to 700 ] for the quarter and for the year.
Okay. So with respect to the -- clarify what you had rolled out from 1st of January, has it been fully reflected? Or still a few of the customers are yet to accept their increase?
So there are a few customers which are yet to increase.
So is it fair -- I mean, if I remember the number right, what is the increase in the blended realization on that count, about 3%?
Yes. Actually, it's going to be around 3%, you're right.
Understood. The second question I had is what is the growth in terms of EXIM for the quarter and for the full year for us?
Achal, we don't really split between with the cargo mix, so I'm not going to share a specific number on the growth of EXIM.
In general, the transshipment has reduced the EXIM. Transshipment reduced because we lost the [indiscernible].
Okay. Understood. Possible to get some sense with respect to the market share, how it has evolved over the last 3, 4, 5 years? Have you seen a loss of market share or we have just maintained the market share?
Probably maintained the market share over the last 3 or 5 years.
Okay. Understood. Any outlook on the margin part with respect to how things are shaping up with respect to product different segments?
We believe that this financial year, we will at least expand our margins, EBITDA margins, by at least 200 basis points. And EBIT should be expanded by at least around [indiscernible].
Understood. And just one more question pertaining to the development of the DMC DC near the port, where is the -- what is the status now? How soon do we expect it to kind of start generating cargo for us given we are the closest port for that? [indiscernible] Region, we hear a lot of announcements being made with respect to newer capacities, new manufacturing set up there. So in terms of your expectation, how soon can it start contributing to our numbers?
So I mean, [indiscernible] clearly, we are a port of choice. I think there are some announcements that have been made. I have a feeling that at least in this coming financial year, there will be no additions from tea. We do expect, however, as we start to move to FY '26, we will start to see some benefits.
Understood. Sir, one more question, if I may, with respect to the container. While, obviously, you have highlighted the skip calls and the impact of that, but in general, are you seeing any signs of pickup with respect to import or export side or things remain as they were during the quarter?
Achal, in general, as they were in the quarter, however, there are certain clear positives, which are around our Middle East trade, Middle East is strong, continues to be strong and is growing. In terms of Europe, we believe it is not strong. Also U.S. has been resilient. I think the inventories post the Red Sea conflict, I think people have started building their U.S. market. So U.S. market has not declined as was expected but has been resilient, so we believe that, that will continue to that. In terms of our Far East and Southeast market, that continues to be steady.
And would it be possible to get a mix? What would be that mix, Middle East, Europe, U.S. Far East for us?
We don't really share those numbers, but we have a service master list for Middle East, we have a master list for U.S. and several services for Far East. But I don't know if we have that news at this stage.
So master list services on Far East for being there. So of course, we are almost [ 33% ] on Far East side.
Understood. And just last question, sorry, I'm saying last again once again. But in terms of the services, I presume that most of the carriers are calling Pipavav Port in some of the other fashion. Is that the right understanding? Or there are certain liners which are yet to work with us at this port?
[indiscernible]
Rest all are then.
Yes, all the large ports.
Priyankar, please go ahead.
My first question is regarding the IOCR issue that you were speaking about. So first thing, for FY '24, can you give me the split of the exceptional items, so essentially for the full year, how much was due to this IOCR? And what was due to the, let's say, cyclone repairs? And finally, again, harping back on that, you see rail issue. So this is like the verdict came in May, if I read from the notes to accounts. So is there some follow-on, let's say, exceptional expenses that can be booked in FY '25 and what will be its one?
The interim, as [indiscernible] is caused by equal case. And the rest is balance these towards a cycle equivalent cost. That's one. We have taken all the required provisions already in the books. As it mentioned, we are making an option we are taking reals. So if it all something comes up in subsequent quarter, it should be an upside.
So it is completely booked. So nothing would be taken at least on this issue in FY '25?
That's right.
Okay. Then my second point is, so regarding like this particular year, compared to the previous years, the dividend payout seems to be slightly on the lower side. So what's your commentary on the dividend payout, given that probably we may be entering into a CapEx like [ INR 90 million ] CapEx that you are saying on the liquid part and then maybe later on other CapEx of expansion. So what should be the broadly dividend payout ranges that one can expect?
Why do you say it is on the lower side?
So this time for the full year, it's INR 3.7, right?
INR 3.7 be final. There was an interim dividend of INR 0.6.
Okay. Sorry, I didn't exactly noticed that. But coming to the part here that on the later part, so for example, like you are going to relatively like the CapEx would still be there, like [ INR 90 million ], bulk of it would be in FY '26 and some bit in FY '25. So would that dividend payout still remain at this high level?
We cannot comment on what we see the dividend level as we move forward. Our policy, however, has been that we kind of give out 100% of our profits as dividend to our shareholders. That policy, at least in the near future, we don't expect to change. The [ INR 100 million ] is already provided. I mean, we will do it from our cash results and internal approvals. We believe that's easy to do at least as I see it, our cash balance, cash loss of notes. So we don't expect any impact of dividend payout in the near term because of the liquid jetty expansion.
Okay. And just on the liquid jetty since we came on that. In this 4Q, the volumes were quite strong, like almost 0.38, 0.39 million tonnes in the fourth quarter. So is this quarterly run rate sustainable for FY '25? So like in FY '25, can we be potentially be seeing a volume closer to, let's say, on an overall year like 1.6 million tonnes at this run rate?
No. I think what we should assume as a full year volume would be in the range of 1.3 million and 1.4 million metric tonnes. It's essentially because of the mix. At times, when we get a mix, which is higher on HSDs, the throughput is much, much higher at roughly [ 650 to 700 ] versus LPG, which is [ 250 to 300 ] versus the things like bitumen, et cetera, which are [ 500 ], right? So the run rate is also reflective of the mix that we got in this quarter. But overall, based on our assessment, our numbers will be more around the 1.4 million for the financial year.
Sir, just one more question. So what I heard from the container that you are telling that this transshipment service by Maersk Jade has been canceled. So you don't have to give the exact figure, but what is the, like, let's say, a percentage-wise, the volume impact because of that, a broad range.
So it roughly was a 3,000 move, which is about 4,500 as per month type of a service.
Okay. Thank you, Priyankar. Nitin Shah.
Am I audible?
Yes. Please.
Yes. My first question is that the concession for the port is kind of succeeding at 2028. Do we have any updates on the renewal part?
Season my update remains as it was last time. I think things have progressed in a very good manner. We do hope to hear the right things. But till the time it happens, we do not want to comment on anything, but there are no red flags. There's not been further discussion in the recent past just to say because of the elections.
All right. Sir, also, the share of net profit of associates this time has dropped especially in the quarter. Could you kind of outline why that would be?
For asset company, there are some cost allocations which were done by the railways the earlier period is charge in the quarter. And that's the reason for the comp.
All right. And if I could, I just had about 1 or 2 more questions, if you don't mind.
No, we don't. Please tell.
So what is the rail coefficient on our cargo? Basically, how much do we use the road and rail services for our cargo, like if you could give me the split on that?
Roughly 65-35, rail-road.
Okay. So rail is 65% and road is 35%.
That's right.
Okay. Any improvement in that in the near future? What is our outlook plan?
I think it's quite high at least at this point in time. There could be marginal differences here and there, but a substantial change is not expected at this point in time. Typically, in fact, we increased cars into last month. We did 31 breaks, which means 1 break of energy rate of car carriers came to our port. Fertilizer continues to be or most of it continues to be transported by rail. Liquid LPG continues to be transported mostly now by rail. And on the container traffic, it could be levies ratio 65-35. And that's the ratio between our hinterland and the market volumes sale. So the local volumes mostly will continue to be.
Okay. And from what I understand, RoRo you use mainly rail service, right?
No, not mainly, but we started using rail. So 1 rail or the average comes down to the port. So this is transporting from not directly to port.
And my last question is, do you have any guidance for volumes or revenues with anything for the coming year?
Yes. So I mean, my guidance we'll give for EBITDA margins, we believe we will improve our EBITDA margins by [ 25 ] basis points this financial year. Also our absolute EBIT will go up by around 7%.
Thank you. Mr. Siddharth Prakash.
Yes, I just have one quick question. Could you give me like a brief -- could you briefly explain how ports may vary based on geographies? Like, what would an Indian port charge be compared to something in Singapore or China?
I would not have that information, Siddharth, it just completely depends on many factors. [indiscernible]
So there's no like brief -- I mean, there's no like general variation based on the country the port is in.
No, it's dependent on a variety of factors.
Okay.
Thank you. Mr. Sai Siddharth.
So just wanted to get a clarification on why you're expecting a 7% increase on [indiscernible] where there's only 200 margin expansion for EBITDA that you're looking at?
I said at least 200 basis points expansion, Sai.
Got it. So how is this flowing to a 7% improvement at EBIT.
There's no point getting into a -- diving into the [indiscernible] at this point in time. But overall, we believe we should be expanding our margins at least by 200 basis points and EBIT at least by 7 percentage points. That's where we would like to stop in terms of guidance.
[indiscernible] absolutely EBIT margins.
Yes. We're looking at absolute EBIT of 7%.
Got it. Also just a clarification on realization that has been seen on the container side this year.
So the order has been in the range of around [ 8,000 to 8,600 ] and for the full year, it's in the range of around [ 7,500 to 8,400].
Thank you. Mr. Kunal Lucas.
Just 3 quick questions, sir. First is, has there been any progress on the port of [indiscernible] pipeline?
So that continues. Kunal, we expect towards the end of the year, trying to be opportunities. That's what we are hearing at this point in time.
If you work out in the numbers of how much potential it can have for us? Or is it too early to say?
It's too early to say, Kunal, at this stage.
All right. And second question is, I think you may have answered this earlier, but given that you have seen your red flags over the concession part, what is your CapEx outlook?
CapEx outlook for?
For the future.
For the entire future, you're saying, Kunal?
I mean currently you are in a concession agreement, right?
So in general -- you are aware that we signed an MOU with GMV Gibaud, which was a [ 1,200 crores ]. So that's our current outlook, if that helps.
And just a last question, how many shipping lines have we been able to add over the last 2 years?
Your voice is not very dear, can you be a little louder?
How about now?
Yes, go ahead.
Shipping lines, how many have we been able to add over the last 2 years?
How many have been doing what?
Shipping lines.
No, there's no new service added in the last few months.
Last 2 years.
Last 2 years, which we have been giving an update every quarter, Kunal, in terms of additions.
Thank you. Deepak Maurya, go ahead.
I had one follow-up. I think Priyankar had asked about the breakup of the nonrecurring or the one-off items. The line was not very clear for us to understand, if you could please repeat that? That's the first question.
Sorry, did you say exceptional item, the breakup you want?
Yes. the exceptional item breakup, which you right out of a few minutes caters. It's not very clear.
Okay. Fair enough. So the exceptional item included INR 52 crores towards the legal case where we had the adverse verdict and the balance is towards the cyclone custom require.
Okay. Understood. And the other thing, which I wanted to understand, the EBITDA margin guidance, which you've given for at least 200 basis points improvement in fiscal year '25 versus fiscal year '24, is this also being driven by the mix, cargo mix, because you are handling -- I mean, you're not handling coal or the share of dry bulk will go down, and therefore, you're seeing an improvement? Or is it cost [indiscernible]?
No, many factors. It is the growth that we expect in liquid and RoRo, plus a slight decline on the dry bulk as well as improvement of mix on our container side as well. So a mix of many factors.
Okay. Yes. That kind of clears it up.
Okay. Thank you. Any other questions, any follow-up questions from anyone? Mr. Rapel Kumar, please go ahead.
So my question is regarding our investment in this year.
Can you be a little louder, please?
Yes. So what is the total investment play in this liquid bulk? And what type of asset terms we can expect from that?
So I mean, we announced CapEx was [ INR 90 million ], roughly, [indiscernible] INR 720-odd crores. That's the client investment on the liquid jetty. What was your second question?
What type of asset terms we can expect from that.
Of course, it would not put a rumor there. But certainly, looking at our demand right now for the liquid business, we certainly expect the full utilization of capacity for a bit of time. But I think that's a growing business and that's what is invested.
I was asking about asset.
We don't know what to really comment right now on that.
Okay. So lastly, liquid bulk, EBITDA margin at the company average level? Or is it higher.
You're really not audible for us. Can you be at least a little longer?
Sir, my question is liquid EBITDA margin is comparable to company average? Or are they higher or lower?
So we are [indiscernible] segment company, so we don't really split our #1 business stream, and that's why I'm not trying to comment on these questions.
Thank you. Mr. Bharat Gupta, please go ahead.
Am I audible?
Yes.
Sir, a question but issue like with respect to the policy formulation, I think GMV will be deciding the policy for both Mundra and for people, if my understanding is correct.
Not only for [indiscernible], but all private costs in the state of the Gujarat.
And sir, due to the election year, I think this has been getting postponed. So are we expecting that the policy will likely to be implemented by the end of this year?
We do expect. But I mean, again, it's not for me to comment. As I said, I mean, we have heard no red flags. We have not seen any red flags in my discussions with relevant authorities. But I mean, the commentary has to be really coming from the government to Gujarat. But you are right, the delay is on account of elections and the code of conduct that -- the election for the ports. But hopefully, we do expect that within this year, our expectation certainly is that in this year, the policy document will be coming out.
Right, sir. I think because of this deferment, I think we are holding on some of our plan. I think liquid jetty, we have already been -- we will be commissioning. But is there any other plan which we have in mind like for developing our port.
So it will depend on many things. But as I said, I mean, it's too early to say this, but you should be aware that we signed an MOU with GMV and government of Gujarat, in vibrant Gujarat summit this January, stating that we would like to invest about [ INR 30 crores to INR 100 crores ].
Thank you. [indiscernible], you can go ahead please.
Just one question in to comprehend your addition on doing a bit coal at a time when coal imports are expected to be a bit on the higher side. So just trying to get what is the thought process here, the focus on profitability, what is driving this? And in the same points, if you can give some kind of color on your way the dry bulk volumes can stabilize or maybe what the kind of number we can look at by FY '25, '26.
Yes, we're expecting in FY -- I mean this financial year or dry bulk numbers to be in similar range or slightly higher than what we have done in this financial year. In terms of coal, as we said that we're working on certain operational improvements in our yard space. Once that is completed, we'll get back to the trade and restart. And I don't think over the next 3 to 4 months, we should be in a position to kind of come back to the trade to say where are we on this.
Thank you. Mohit, you have your hand raised, do you have any follow-up questions? Mr. Vilan Jain, please go ahead.
I just wanted to get an outlook maybe sort of a volume guidance on how are we looking at the container volumes for FY '25?
So it's difficult to give us complete guidance, honestly, on to because there's just too many things that are happening at this point in time. Maybe if you're all okay, we'll come back to this question in the next analyst call, we should have a little bit more clarity.
No worries. And secondly, if I heard it , you mentioned that the liquid cargo, you're expecting around [ 1.4 million ] for this fiscal. So again, that comes to almost like a 10% sort of growth for the current year. I remember us talking about 20%-plus sort of a growth for at least like the next couple of years in the past 1 or 2 quarter calls.
No, no, no, must be a mistake somewhere. Our capacity, we have always maintained is in the region of [ 1.3 to 1.4 ]. We can't go beyond that. Just a slight up and down based on the mix of the cargo that we expect -- as I was just explaining, I mean, if the volumes go up, then the capacity will go up a little bit if LPG -- I mean if bitumen or [indiscernible] comes up, then it moves down. So but we are at probably get capacity. So there's not too much beyond this until and unless we commission a new jetty.
But our rated capacity is around [ 2 million ].
On you said you can do -- depending on the mix [indiscernible] is what.
I mean just as example, right? If you look at our fuel HSD of a cargo to throughput [ 650, 700 ] versus LPG, which is [ 300-ish ] versus a bitumen, which is [ 80 to 100-ish ], so I mean the throughput defines the final capacity, right?
Yes, [indiscernible] have follow-up questions.
Yes, sorry, I was mute. So just on the RoRo side of things, can you just share something on the outlook on this side of the business? It seems like the auto exports are significantly going up. So how do you see this business, let's say, in FY '25 and let's say, in a 2-, 3-year horizon? And I won't disclose the numbers, but can you give us a sense of its profitability in the sense if you have to rank, let's say, containers liquids? And where does RoRo exactly stand?
In terms of volume model car, right? I think we expect seem to export growth over the, let's say, next year already going. You've seen our numbers in terms of growth on the RoRo side, we expect to continue to grow in our port in this financial -- or the coming financial year, we expect the numbers anywhere reaching between 150,000 to 175,000 cars.
Pardon, how much did you say, 175,000 cars?
150,000 to 175,000 cars.
Okay. And just again, coming back to this, let's say, the RoRo question itself. Like, is it a meaningful part of our revenue now, I mean, like for us to factor in it like if you can broad percentage types?
I don't know what is your definition of meaningful, but certainly.
Is it like 5% or something, broad range maybe?
So no -- so around 10% on the revenue. And as I mentioned earlier, right, so both liquid and RoRo are aging business for us. We operate on the land and water. That's why we are very much keen on both these business streams.
Okay. So essentially, let's say, the liquids and RoRo, if my understanding is correct, would be like margins broadly?
Sorry, can you repeat?
Rural and LPG would be similar margins broadly?
Yes.
Okay. Any follow-up questions from you, [indiscernible]? You have your hand raised.
No, thank you.
Mr. Kumar, do you have any follow-up questions? You have your hand raised. It doesn't seem to be the case. Mohit, anything from you? Thank you very much.
Thank you very much for your time. Again, we will hope to continue this strong performance as we move forward. I think things are really looking up in certain sectors for us. We're also aggressively working on expansion of our services, and I look forward to talking to you next quarter results. Thank you.
Thank you, everyone.
Thank you.
Have a good day.