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GVK Power & Infrastructure Ltd.
Aggressive bidding weigh on
Shivpuri-Dewas highway
Incorporating the SD highway, Cut PO, Retain Buy
GVK’s Shivpuri – Dewas (SD) highway (332 km length) is now estimated to yield
an NPV value of Rs(5.1)bn at 16% CoE. Accordingly, we have cut our PO to Rs25
(vs Rs28 earlier). Our channel checks suggest average revenue of Rs10mn/day in
FY16E (first year of tolling). PE infusion at airport/transportation/power vertical
would be key deleveraging catalyst. Buy particularly on Mumbai realty
monetization, 2x power capacity by FY14E with coal cost recoverable and cheap
valuation (P/BV 0.4x).
Traffic: mainly perishable/consumer/petroleum products
Channel checks suggest that the perishable items, consumer products, chemical
/petroleum products and crops are the key commodities transported, largely by
commercial vehicles. Traffic dispersion is average along Dewas end / middle of
the corridor, drops sharply at an intermediate plaza on diversion but rises sharply
than average towards Shivpuri. Our revenue est. of Rs10mn/day is based on avg.
traffic of 22,500 PCU, looks reasonable vs nearby concessions (vs 35,000 PCUs
at Dewas for Indore-Dewas, 21,300 PCUs at Shivpuri for Shivpuri-Gwalior).
SD road: 29% of Mumbai-Agra road, 2nd largest concession
The SD highway is a (a) 332 km stretch in Madhya Pradesh (central India), (b) 2nd
largest highway concession awarded by NHAI (c) covers ~ 29% of Mumbai-Agra
highway, (d) has 5 toll plazas, (e) involves 2 to 4-laning (f) is estimated to cost
Rs32bn (D:E 70:30) and (g) annual toll hike linked to fixed 3% + 40% of Dec’ level
WPI. GVK’s bid at revenue share of Rs1.8bn was 64% / 79% higher vs 2nd/3rd
bidders. Concession agreement and financial closure is assumed by 1QFY13E.
Execution, traffic, debt terms are key upside risk
Upside risk to our NPV value: higher traffic growth (a 100 bps rise in traffic growth
raise NPV to Rs5.3bn), attractive debt terms (a 100 bps lower interest rate raise
NPV to Rs(3.4)bn), faster execution (<3 years)and lower O&M expenses.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GVK Power & Infrastructure Ltd.
Aggressive bidding weigh on
Shivpuri-Dewas highway
Incorporating the SD highway, Cut PO, Retain Buy
GVK’s Shivpuri – Dewas (SD) highway (332 km length) is now estimated to yield
an NPV value of Rs(5.1)bn at 16% CoE. Accordingly, we have cut our PO to Rs25
(vs Rs28 earlier). Our channel checks suggest average revenue of Rs10mn/day in
FY16E (first year of tolling). PE infusion at airport/transportation/power vertical
would be key deleveraging catalyst. Buy particularly on Mumbai realty
monetization, 2x power capacity by FY14E with coal cost recoverable and cheap
valuation (P/BV 0.4x).
Traffic: mainly perishable/consumer/petroleum products
Channel checks suggest that the perishable items, consumer products, chemical
/petroleum products and crops are the key commodities transported, largely by
commercial vehicles. Traffic dispersion is average along Dewas end / middle of
the corridor, drops sharply at an intermediate plaza on diversion but rises sharply
than average towards Shivpuri. Our revenue est. of Rs10mn/day is based on avg.
traffic of 22,500 PCU, looks reasonable vs nearby concessions (vs 35,000 PCUs
at Dewas for Indore-Dewas, 21,300 PCUs at Shivpuri for Shivpuri-Gwalior).
SD road: 29% of Mumbai-Agra road, 2nd largest concession
The SD highway is a (a) 332 km stretch in Madhya Pradesh (central India), (b) 2nd
largest highway concession awarded by NHAI (c) covers ~ 29% of Mumbai-Agra
highway, (d) has 5 toll plazas, (e) involves 2 to 4-laning (f) is estimated to cost
Rs32bn (D:E 70:30) and (g) annual toll hike linked to fixed 3% + 40% of Dec’ level
WPI. GVK’s bid at revenue share of Rs1.8bn was 64% / 79% higher vs 2nd/3rd
bidders. Concession agreement and financial closure is assumed by 1QFY13E.
Execution, traffic, debt terms are key upside risk
Upside risk to our NPV value: higher traffic growth (a 100 bps rise in traffic growth
raise NPV to Rs5.3bn), attractive debt terms (a 100 bps lower interest rate raise
NPV to Rs(3.4)bn), faster execution (<3 years)and lower O&M expenses.
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