GMR Infrastructure- Low per pax revenues : Kotak Sec

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GMR Infrastructure (GMRI)
Infrastructure
Low per pax revenues and capacity costs to impact near-term earnings as well.
Revenues were flat yoy at Rs12 bn while growth was led by the airport (42%). Power
declined (by 8% on lower PLF) as did EPC (Sabiha complete). High capacity costs
(operational cost, depreciation and interest costs) for T3 terminal led a net loss of Rs978
mn (DIAL EBITDA margin of 2%). Traffic growth was strong across airports while per
pax aero (higher seat utilization) and non-aero (contract renegotiation) were lower.




In line revenues; high depreciation and interest cost leads to net loss for the quarter
GMRI reported revenues of Rs12.2 bn, up 2.3% yoy, broadly in line with our estimate. The
revenue growth was led by the airports segment (strong traffic growth, increase in UDF at
Hyderabad airport) and increase in treasury income post QIP. Margins contracted by 270 bps yoy
to 29.1% led by higher generation & operating expenses, employee and admin expenses as a
percentage of sales. High depreciation and interest costs (due to capitalization of T3 terminal) led
to net loss (excluding exceptional items) of Rs978 mn. GMR reported exceptional income of Rs1.4
bn led by reversal of impairment loss accounted earlier in its subsidiary Island Power Co. Pte. Ltd.

Low per pax revenue, capacity costs impact DIAL results; power revenues decline on low PLF
􀁠 Airports: The airports segment led revenue growth, growing at 42% yoy on strong traffic
growth (at all three airports), higher per pax UDF collection at GHIAL and start of operations of
new terminal building at SGIA. However, increased operational cost at new T3 terminal in DIAL
and capitalization of the same led to lower profitability and net loss of Rs1.1 bn in 2QFY11.
􀁠 Power: The power segment reported a 8% yoy decline in revenues in 2QFY11 to Rs4.9 bn
attributed to low PLF at the Chennai power plant (GPCPL) of 40% versus 76% in 2QFY10 on
account of the heavy rainfall. GEL was successfully shifted to Kakinada and the plant started
operations from August 2010 operating at a PLF of 46% in 2QFY11.
􀁠 Roads, EPC, others: Roads segment recorded 8% yoy revenue growth led by increased traffic
levels at all three toll-based projects. The EPC revenues of the company declined on a yoy basis
due to completion of construction works in Sabiha Gokcen airport while high treasury income
(post QIP in April 2010) led to high other income in the quarter.

Maintain earnings estimates; reiterate ADD with a revised SOTP-based target price of Rs60/share
We revise our target price to Rs60 (from Rs65) based on the removal of value of coastal power and
hydro projects from the target valuation as the company has reported little or no progress in these
projects. Reiterate ADD based on (1) incremental visibility on identified projects, (2) likely pick-up in
demand across assets and (3) incremental project wins.