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3QFY11: Mixed results
ƒ Power trips up due to the gas shortage; revenue miss of 18%
ƒ Highway project on track; decent toll collections
ƒMIAL revenue up 8% q-q; BIAL revenue up 4% q-q
ƒ Valuation: TP INR44 based on SoTP of DCF of various assets
3QFY11 results
GVK’s 3QFY11 revenue of INR4.6b fell
9% q-q, due mainly to weak performance
at its power plants. Operating metrics at
the power plants suffered due to partial
non-availability of gas and lower power
offtake by the distribution companies.
Thus, EBITDA declined 11% q-q. Jaipur
Kishangarh, the only operational highway
BOT of GVK, reported in-line revenue.
EBT declined 55% q-q, due to an increase
in interest cost and depreciation. The
increase in interest cost was due to higher
debt that was used for the initial financing
of development projects. Additionally,
higher amortisation at the Jaipur-Kishangarh highway resulted in an 8%
q-q increase in depreciation expense. The tax expense was negative, as
the company recognised MAT (minimum alternate tax) credit at its
Jegurupadu power plant. Net profit before minority and associates
declined 51% q-q. Lower minority interest (20% down q-q) and higher
associate profits (39% increase q-q) resulted in flat net profit q-q (after
minority and share in profit of associates).
Outlook
We look for further clarity on the gas shortage issue at GVK’s operational
power plants. Management reiterated that the first tranche of 1.04m sq ft
of MIAL real-estate development should start in 2QFY12. The high court
ruling on merchant power sales at its operational power plants is still
pending. Any development on these issues should have a positive impact
on the stock.
Valuation
We value GVK at INR44/share on a SoTP basis. Airports contribute
INR25 (including INR11 from Mumbai International Airport and INR2 from
BIAL real estate), power INR10, and highways INR6 to our TP. We value
the individual businesses on DCF at 13.5% COE. We value the cash
received from the stake sale in power at INR7/share and net the debt
raised for BIAL’s stake purchase (INR4). Assets not included in our
valuation (2.6GW power projects, INR8.5b highway project, SEZ, and oil
& gas investments) could provide upside to our TP. Risks to TP: delays
in monetising airport-related real estate, lower-than-anticipated traffic
growth or non-aero revenue, higher-than-expected interest rates and the
unavailability of financing for its projects.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY11: Mixed results
ƒ Power trips up due to the gas shortage; revenue miss of 18%
ƒ Highway project on track; decent toll collections
ƒMIAL revenue up 8% q-q; BIAL revenue up 4% q-q
ƒ Valuation: TP INR44 based on SoTP of DCF of various assets
3QFY11 results
GVK’s 3QFY11 revenue of INR4.6b fell
9% q-q, due mainly to weak performance
at its power plants. Operating metrics at
the power plants suffered due to partial
non-availability of gas and lower power
offtake by the distribution companies.
Thus, EBITDA declined 11% q-q. Jaipur
Kishangarh, the only operational highway
BOT of GVK, reported in-line revenue.
EBT declined 55% q-q, due to an increase
in interest cost and depreciation. The
increase in interest cost was due to higher
debt that was used for the initial financing
of development projects. Additionally,
higher amortisation at the Jaipur-Kishangarh highway resulted in an 8%
q-q increase in depreciation expense. The tax expense was negative, as
the company recognised MAT (minimum alternate tax) credit at its
Jegurupadu power plant. Net profit before minority and associates
declined 51% q-q. Lower minority interest (20% down q-q) and higher
associate profits (39% increase q-q) resulted in flat net profit q-q (after
minority and share in profit of associates).
Outlook
We look for further clarity on the gas shortage issue at GVK’s operational
power plants. Management reiterated that the first tranche of 1.04m sq ft
of MIAL real-estate development should start in 2QFY12. The high court
ruling on merchant power sales at its operational power plants is still
pending. Any development on these issues should have a positive impact
on the stock.
Valuation
We value GVK at INR44/share on a SoTP basis. Airports contribute
INR25 (including INR11 from Mumbai International Airport and INR2 from
BIAL real estate), power INR10, and highways INR6 to our TP. We value
the individual businesses on DCF at 13.5% COE. We value the cash
received from the stake sale in power at INR7/share and net the debt
raised for BIAL’s stake purchase (INR4). Assets not included in our
valuation (2.6GW power projects, INR8.5b highway project, SEZ, and oil
& gas investments) could provide upside to our TP. Risks to TP: delays
in monetising airport-related real estate, lower-than-anticipated traffic
growth or non-aero revenue, higher-than-expected interest rates and the
unavailability of financing for its projects.
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