GMR Infrastructure -Weak Sep-q results- JPMorgan

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GMR Infrastructure Ltd Neutral
GMRI.BO, GMRI IN
Weak Sep-q results



• GMR reported an adjusted loss of Rs.692M in 2Q vs. a profit of
Rs.537M last year, much below consensus expectation of Rs200M
profit. EBITDA declined 6.3% YoY to Rs3.56B, mainly on account of
(a) weak revenue booking in the EPC segment, compared to Sep-q last
year which had seen healthy topline from construction work at Sabiha
airport, now complete (b) Energy segment EBITDA fell 4.4% YoY due
to lower generation at Basin Bridge (220MW) and lower trading
revenues, (c) Sharp decline in airport segment margins


• Exceptional gain of Rs1.4B booked in Sep-q. Advance paid to EPC
vendors for Island Power in May-07 was credited back to P&L. GMRI
had acquired 100% stake in Island Power in May-09 and expects to
achieve financial closure of the 765MW combined cycle gas based
project by Mar-11.

• T3 capitalization dampens bottom line. On the back of healthy traffic
growth (Dial +10%yoy, GHIAL +12%yoy and Turkey +96%yoy) in 2Q
revenue performance was strong for the airports segment with top line
increasing 42%yoy to Rs.4.8B (~40% of total revenue). However
EBITDA growth was muted at +6%yoy translating into a ~900bps yoy
decline in margins to 25%, on account of higher operating expenses at
the newly commissioned terminal at DIAL, in our view. Capitalization of
T3 resulted in an EBIT decline of 84%yoy to Rs.73.4M on account of
higher depreciation. The second phase of land monetization at DIAL is
expected to be launched in FY11, while plans for Hyderabad real estate
will also be firmed up.

• Power segment continued its weak performance. The 235MW barge
mounted power plant has been relocated to Kakinada in KG basin and
has commenced combined cycle operations in Aug-2010. Overall power
segment revenues declined 7% yoy and 12% qoq with a flat EBITDA
margin of 21%.

• The Hugund-Hospet highway project achieved financial closure in
Sep-10, now GMR has 6 operational road projects and 3 under
construction including Chennai ORR and Hyderabad-Vijayawada.
• Increased stake in Homeland Energy. GMRI has increased holding in
Homeland Energy Group from 33.47% (acquired in 2008) to 55.8%.
HEG owns coal mine assets with resources of ~400MMT in South
Africa.