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Adjusted Q2FY11 PAT lower than expectations
Against our PAT estimates of INR 843 mn, GMR Infrastructure (GMR) reported
PAT of INR 711 mn, which included prior period expenses write-back of INR 1.4
bn. The resultant operating loss is largely due to higher operating expenses at
Delhi airport, post commissioning of T3 terminal and below expected revenues
from Kakinada power plant.
Traffic growth in road, airport projects; PLF dips in 2 power units
Traffic grew a robust 25% Y-o-Y in DIAL (35% domestic and 16% international)
and 12.7% in HIAL (17% domestic and 25% international). Traffic growth at its
various toll-based road projects also ranged from 6-12% Y-o-Y. PLF at Kakinada
plant was just 40% as the combined cycle was operational only since August and
gas supply was lower than anticipated.
Achieves financial closure for three projects
GMR achieved financial closure for: (a) Male airport in Maldives, entailing USD
511 mn capex in Phase I (70:30 debt-equity), towards which it has paid upfront
concession fees of USD 78 mn; (b) gas-based 768 MW project at Rajahmundry,
AP; and (c) 99 kms four-lane INR 16.5 bn Hungund-Hospet road project.
Capital structuring underway; focus on enhancing profitability
The management in the concall highlighted that its focus has now shifted from
enhancing project portfolio to increasing profitability. The company has also
utilised surplus cash to repay debt across various SPVs to the extent of ~INR 16
bn. This, coupled with the likely sale of Intergen stake and cost rationalisation
drive (especially at airports), should enhance earnings in future.
Outlook and valuations: Expect traction; upgrade to ‘BUY’
We have calibrated the FY11E earnings to factor in impact of higher O&M and
increased capex in DIAL. After factoring in the three financially closed projects,
we revise up our SOTP to INR 64/share. Likely traction in project portfolio,
accretion to land value and higher pax growth in airports, along with efficient
capital allocation (exit Intergen/restructuring debt) could aid earnings growth
and, hence, valuations. We upgrade the stock to ‘BUY’ from ‘HOLD’ and retain
‘Sector Outperformer’ recommendation on it.
If the rating is buy then why is the stock slow & steadily moving down. On every rally, irrespective of sensex movement & any good news this stock only moves down.
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