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GMR Infrastructure reported Q2FY12 loss of INR625mn against our
estimate of INR285mn mainly due to higher interest costs at DIAL,
deferred tax liability in power and airport projects, admin expenses in
overseas units and lower PLF at one of its power plants (marginally offset
by forex gains); adjusted for these, loss would have been INR403mn.
Operational performance continues to be robust and with the regulatory
approval for its airport assets on the anvil, we expect an upsurge in
earnings. Maintain ‘BUY’ with target price of INR47
Pax growth robust, but PLFs dip due to seasonal factors
The traffic growth across airports remained strong (23% in DIAL, 20% in Istanbul and
15% in HIAL). However, there are early signs of impact from global economic weakness
as sequentially, pax has fallen in the range of 2% – 7% in India. Power plants operated
at PLF of ~58% against 65% last year and 75% in Q1FY12 mainly due to the
maintenance shutdown at Vemagiri and lower merchant realisation at Kakinada.
Sinar Mas stake purchase in Q3; EPC margins to stabilize at 5‐6%
The management has indicated that it will acquire 30% stake in Sinar Mas, the
Indonesian coal mining company, through the latter’s proposed IPO and subsequent
stake buys. As part of the deal, it would be eligible to receive 1 MT of coal which will
gradually increase to 9 MT over a period of time at 6%‐8% discount to the benchmark
index. The EPC business ‐ entirely captive ‐ is likely to deliver 5%‐6% EBITDA margins
over the life of project.
Outlook and Valuation: Regulatory clarity likely; Maintain ‘BUY’
The management has indicated that the airport regulator is in an advanced stage of
deciding on both ADF and tariffs for Delhi and Hyderabad which we believe would
alleviate the regulatory concern on the stock. We have factored in Ahmedabad –
Kishangarh mega road project and the Island Energy gas project in our valuation which
stands at INR47/share (INR 56/share earlier). We are confident on an improvement in
GMR’s financial performance and management’s stated objective of greater focus on
cash flows. At CMP of INR 26/share, the stock is trading at 1.1x and 1.0x FY12E and
FY13E P/BV. Maintain ‘BUY’.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GMR Infrastructure reported Q2FY12 loss of INR625mn against our
estimate of INR285mn mainly due to higher interest costs at DIAL,
deferred tax liability in power and airport projects, admin expenses in
overseas units and lower PLF at one of its power plants (marginally offset
by forex gains); adjusted for these, loss would have been INR403mn.
Operational performance continues to be robust and with the regulatory
approval for its airport assets on the anvil, we expect an upsurge in
earnings. Maintain ‘BUY’ with target price of INR47
Pax growth robust, but PLFs dip due to seasonal factors
The traffic growth across airports remained strong (23% in DIAL, 20% in Istanbul and
15% in HIAL). However, there are early signs of impact from global economic weakness
as sequentially, pax has fallen in the range of 2% – 7% in India. Power plants operated
at PLF of ~58% against 65% last year and 75% in Q1FY12 mainly due to the
maintenance shutdown at Vemagiri and lower merchant realisation at Kakinada.
Sinar Mas stake purchase in Q3; EPC margins to stabilize at 5‐6%
The management has indicated that it will acquire 30% stake in Sinar Mas, the
Indonesian coal mining company, through the latter’s proposed IPO and subsequent
stake buys. As part of the deal, it would be eligible to receive 1 MT of coal which will
gradually increase to 9 MT over a period of time at 6%‐8% discount to the benchmark
index. The EPC business ‐ entirely captive ‐ is likely to deliver 5%‐6% EBITDA margins
over the life of project.
Outlook and Valuation: Regulatory clarity likely; Maintain ‘BUY’
The management has indicated that the airport regulator is in an advanced stage of
deciding on both ADF and tariffs for Delhi and Hyderabad which we believe would
alleviate the regulatory concern on the stock. We have factored in Ahmedabad –
Kishangarh mega road project and the Island Energy gas project in our valuation which
stands at INR47/share (INR 56/share earlier). We are confident on an improvement in
GMR’s financial performance and management’s stated objective of greater focus on
cash flows. At CMP of INR 26/share, the stock is trading at 1.1x and 1.0x FY12E and
FY13E P/BV. Maintain ‘BUY’.
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