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GMR Infrastructure (GMRI)
Infrastructure
Strong quarter performance; but regulatory uncertainties remain. GMR reported
strong, broad-based (across airport, power, EPC verticals) revenue growth of 51% yoy
to Rs18.6 bn. However, high interest and depreciation costs (on commercialization of
T3 terminal) led to a net loss of Rs1.3 bn. However regulatory uncertainties related to
DIAL (real estate valuation and tariff order), GHIAL (tariff order) and fuel availability risks
(gas-based Vemagiri power plant) remain. We retain our ADD rating (TP: Rs42).
Strong revenue growth; high depreciation, interest expenses leads to net loss
GMRI reported strong revenues of Rs18.6 bn, up of 51% yoy led by the airports, EPC and power
segments. Margins contracted by 390 bps yoy to 26.7% on higher employee and admin expenses.
High depreciation and interest costs (on commercialization of T3 terminal at Delhi Airport) led to a
net loss of Rs1.3 bn versus a profit of Rs318 mn in 1QFY11.
Regulatory uncertainties related to DIAL ADF, real estate and GHIAL tariff remain
The company continues to faces regulatory uncertainties related to (1) treatment of real estate in
Delhi airport by AERA, (2) renewal of ADF (temporarily suspended by the supreme court until
further clarity from the regulatory authority), and (3) tariff order and real estate treatment in
Hyderabad airport project. However, the current market price seems to be factoring in most of
these uncertainties (removing full value of DIAL would still leave an SOTP valuation of about Rs30).
Strong revenue growth witnessed across most segments
Airports: Strong 98% revenue growth driven by (1) traffic growth across Delhi, Hyderabad and
Sabiha Gokcen airport, (2) revenues from Male Airport (not present in previous year) and (3)
increased UDF charges at Hyderabad airport. Profitability decline (EBIT margin of 10.3% versus
20.3% in 1QFY11) is likely to have been led by capitalization of T3 terminal at Delhi airport.
Power: Strong growth of about 18% yoy, to Rs6.9 bn, primarily on operations of the bargemounted
GEL power project which was not operational in the previous year.
EPC: Revenues grew over 5X yoy (though from a low base) to Rs2.1 bn in 1QFY12 primarily on
execution of three road projects of GMR (expected to continue till end-CY2012E).
Roads: Roads segment saw muted performance in 1QFY12 (revenues remained relatively flat
yoy at Rs1 bn) despite strong traffic growth in toll-based projects on one-off adjustments.
Retain ADD with a revised TP of Rs42/share; regulatory uncertainties remain
We retain ADD with a revised TP of Rs42 (from Rs45) as valuations appear reasonable (1.7X
FY2012E P/B). However, uncertain regulatory overhang and large real estate dependence remain
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GMR Infrastructure (GMRI)
Infrastructure
Strong quarter performance; but regulatory uncertainties remain. GMR reported
strong, broad-based (across airport, power, EPC verticals) revenue growth of 51% yoy
to Rs18.6 bn. However, high interest and depreciation costs (on commercialization of
T3 terminal) led to a net loss of Rs1.3 bn. However regulatory uncertainties related to
DIAL (real estate valuation and tariff order), GHIAL (tariff order) and fuel availability risks
(gas-based Vemagiri power plant) remain. We retain our ADD rating (TP: Rs42).
Strong revenue growth; high depreciation, interest expenses leads to net loss
GMRI reported strong revenues of Rs18.6 bn, up of 51% yoy led by the airports, EPC and power
segments. Margins contracted by 390 bps yoy to 26.7% on higher employee and admin expenses.
High depreciation and interest costs (on commercialization of T3 terminal at Delhi Airport) led to a
net loss of Rs1.3 bn versus a profit of Rs318 mn in 1QFY11.
Regulatory uncertainties related to DIAL ADF, real estate and GHIAL tariff remain
The company continues to faces regulatory uncertainties related to (1) treatment of real estate in
Delhi airport by AERA, (2) renewal of ADF (temporarily suspended by the supreme court until
further clarity from the regulatory authority), and (3) tariff order and real estate treatment in
Hyderabad airport project. However, the current market price seems to be factoring in most of
these uncertainties (removing full value of DIAL would still leave an SOTP valuation of about Rs30).
Strong revenue growth witnessed across most segments
Airports: Strong 98% revenue growth driven by (1) traffic growth across Delhi, Hyderabad and
Sabiha Gokcen airport, (2) revenues from Male Airport (not present in previous year) and (3)
increased UDF charges at Hyderabad airport. Profitability decline (EBIT margin of 10.3% versus
20.3% in 1QFY11) is likely to have been led by capitalization of T3 terminal at Delhi airport.
Power: Strong growth of about 18% yoy, to Rs6.9 bn, primarily on operations of the bargemounted
GEL power project which was not operational in the previous year.
EPC: Revenues grew over 5X yoy (though from a low base) to Rs2.1 bn in 1QFY12 primarily on
execution of three road projects of GMR (expected to continue till end-CY2012E).
Roads: Roads segment saw muted performance in 1QFY12 (revenues remained relatively flat
yoy at Rs1 bn) despite strong traffic growth in toll-based projects on one-off adjustments.
Retain ADD with a revised TP of Rs42/share; regulatory uncertainties remain
We retain ADD with a revised TP of Rs42 (from Rs45) as valuations appear reasonable (1.7X
FY2012E P/B). However, uncertain regulatory overhang and large real estate dependence remain
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