GMR Infrastructure -Impact of DIAL tariff hike to be visible from Q2 ::religare research,

GMRI’s Q1 PAT came in lower than our estimates as the full impact of a tariff hike at Delhi Airport (DIAL) was not realised during the quarter. This shortfall (in Q1FY13) will be made up for in the next control period (FY14‒FY19) and doesn’t impact our valuations for GMRI. Majority of the tariff hike impact will be visible in Q2FY13 numbers, This deferral in revenue booking leads us to cut our FY13 revenue/EPS estimates zby 2%/14%. Maintain BUY with a March’13 TP of Rs 32.

Nirmal Bang: “BUY” GMR Infrastructure - Target Price: Rs30

Losses Peak Out, Relief Ahead
GMR Infrastructure reported 4QFY12 net loss of Rs3.66bn (above our
estimate of a loss of Rs1.16bn and Bloomberg estimate of a loss of
Rs656mn) due to lower PLF in the energy segment, annual corporate cost
allocation to the airport segment, cost adjustment in the EPC segment and
exceptional items of Rs 1.16bn. We believe the losses have peaked out and
the revised tariff rates at Delhi airport (major reason for the losses in the
past) would improve its financial performance. However, poor performance
of the power segment due to shortage of gas and delay in the process of
monetisation of real estate at DIAL (Delhi International Airport) leads us to
trim our earnings estimate for FY13 and also the target price. We have
revised downwards our TP on the stock from Rs39 to Rs30 based on SOTP
valuation, but retained our Buy rating on it.

Goldman Sachs: GMR Infrastructure- Below expectations on high fuel costs and interest; retain Neutral

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


EARNINGS REVIEW
GMR Infrastructure (GMRI.BO)
Neutral Equity Research
Below expectations on high fuel costs and interest; retain Neutral
What surprised us
GMR reported 3Q EBITDA of Rs4.7bn, below GSe and Bloomberg consensus
estimate primarily due to higher fuel costs and other operating expenses in
the power segment. Revenue was above GSe at Rs20bn on higher-thanexpected
EPC and power revenues (+390% and +17% yoy, respectively).
Interest expense continued to rise and was up 10% qoq. The company raised
its capex guidance to Rs140bn for FY13 from Rs100bn earlier. In addition, it
expects to commission 3 power plants (~2400MW) and 2 road projects
(~280km), contributing substantially to revenue growth for FY13-14.
What to do with the stock
We continue to believe that uncertainty around fuel (gas and coal) supplies
for the existing and under construction power projects remains high, while
the likely positive impact of the change in airport tariffs is already largely
reflected in GMR’s current share price. In addition, funding requirements
for the Rs77bn Kishangarh-Ahmedabad highway and for other projects
under development could continue to put pressure on GMR’s already
leveraged balance sheet – FY13E debt/equity of 3.2X. Better-than-expected
resolution on these issues would be a positive for the stock, in our view.
We revise our FY12E-FY14E EPS on the back of 3Q results (higher revenue
from power and airports and adjusting for higher debt to fund capex).
Consequently, we fine-tune our 12-m SOTP-based TP to Rs29 (from Rs28).
Key risks: Downside – Prolonged weakness in traffic, delay in power plant
commissioning, inability to raise finances. Upside – Real estate
monetization, favorable airport regulation.

Hold GMR Infrastructure; Target : Rs 32 ::ICICI Securities (pdf link)

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


PDF LINK for report- click HERE



 O n e - o f f   i t e m s   d e n t   b o t t o m l i n e …
GMR Infrastructure (GMR) reported its Q3FY12 numbers with a higher net
loss largely on account of one-offs, which had a net negative implication
of | 78.7 crore. Adjusting for the same, the company’s net loss was lower
at | 29.3 crore vs. our estimate of adjusted net loss of
| 58.5 crore. The AERA discussion paper on DIAL’s tariff fixation was also
released in January 2012, which suggested an upfront increase in tariffs
of ~334.6% from FY13 and ~148% in the following year vs. DIAL’s
demand of ~774.3% and ~138%, respectively.
ƒ Q3FY12 reported losses higher than expected due to one-offs…
GMR’s net sales grew 47% YoY to | 1,999.3 crore mainly on account of
consolidation of the Male Airport for the full quarter in Q3FY12 (| 304.9
crore) vs. one month in Q3FY11 (|  84.1 crore) and sharp jump in EPC
revenue (| 405.6 crore in Q3FY12 vs. | 82.8 crore in Q3FY11). The
margins at 22.5% were lower than our estimates of 28.9% mainly due to
one-offs worth | 55 crore in the power segment leading to lower margins
of 8.6% in power segment vs. 16.7% in Q2FY12. The bottomline pain,
therefore, was accentuated by one-offs, which had a net negative
implication of | 78.7 crore. Please refer Exhibit 2 on next page for details.
ƒ Discussion paper on tariff fixation out, final verdict in Q4FY12E…
AERA’s discussion paper on tariff fixation was out on January 3, 2012,
which suggested an upfront tariff increase of ~334.6% from FY13 and
~148% in the following year vs. DIAL’s demand of ~774.3% and ~138%,
respectively. Even on AERA’s indicated hike and proposed aero revenues,
if approved, our quick estimates suggest DIAL’s losses would reduce to
| 100 crore in FY13E from losses of | 325 anticipated earlier. Also, GMR’s
consolidated PAT could go up by 1.3x to | 404 crore from our estimates
(please refer page 2 for details). However, we are still awaiting the final
verdict after stakeholder negotiation and will re-work the same after the
final verdict.
V a l u a t i o n
At the CMP of | 31, the stock is trading at 1.1 FY13 P/BV. We believe any
development on airport tariff fixation and fuel allocation for power
projects will act as a key catalyst for GMR’s stock price performance. We
are assigning a HOLD recommendation on the stock with an SOTP based
price target of | 32/share. 

GMR Infrastructure: AERA takes a harsh stand on tariffs of Delhi Airport:: Emkay

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

GMR Infrastructure

Reco: Under Review

CMP: Rs 23

Target Price: Under Review

AERA takes a harsh stand  on tariffs of Delhi Airport

·      Prima facie terms included in consultation paper (CP) are negative for DIAL. CP terms disallows returns on real estate (RE) deposits collected by DIAL, thus capping RE upsides

·      WACC at 10.3%v/sexp. 12%, Non approval returns on RE deposits will hurt profitability. Near term Rev. likely to be higher than our exp. due to reimbursement of accum. losses (Apr09-Mar12) driving 280% increase over FY13&FY14

·      DIAL RE comprised 24% of TP, Regulator has cornered DIAL by offering no return on erstwhile RE deposits & we caution about prospective returns that DIAL can generate from RE

·      Ratings & TP are kept under review for GMR till tariff mechanism is finalized. By Feb–12 the final tariff order is expected to take the final shape & clarity to emerge

GMR Infrastructure (GMRLF, Underperform) BofA Merrill Lynch,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


GMR Infrastructure (GMRLF,
Underperform)
Bear case: What can go wrong?
􀂄 Postponement of monetization (leasing) of the real estate asset (total 205
acres) at Delhi airport by a year to FY15E onwards, at 15% lower realization.
􀂄 A 6-month delay in tariff hike at Delhi airport. No airport development charge
(ADC) at Male airport in CY12E. Decline in airport revenues on lower
passenger traffic (500bps fall in FY13/14E).
􀂄 Decline in the revenues from road projects on lower traffic (100bps fall).
􀂄 Higher e-auction price for coal by 40%. Usage of expensive e-auction coal /
imported coal to hit earnings as escalation is not fully recoverable in tariffs for
competitive bid capacity (about 49% of FY14E volume is on competitive bid).
􀂄 Interest rate rise by 50bps as leverage is amongst the highest vs peers and
rupee depreciate to 52 /USD for FY12/13E.
􀂄 Consequently, we estimate a loss in FY13E at Rs2.5bn.
Base case: Regulatory /fuel supply risk prevails
􀂄 Assumed 25% rise in aero tariff at Delhi airport (16% of SoTP) during FY13-
17E. Realty monetization (29% of SoTP) to commence from FY14E at
average realization of Rs900mn/acre.
􀂄 A 4.4x jump in power volume over FY11-14E to 20.2bn units by FY14E on
commissioning of 2.8GW power plants. Lower price for coal exports by 10-
18% for FY13/14E on revised BofAML estimates. We estimate loss in FY13E
of Rs(185)mn (earlier Rs174mn). Lower PO to Rs25 (earlier Rs28).
Risk-reward: Unfavourable
􀂄 In bear case, we expect stock to trade at Rs16/share (P/BV of 0.8x FY13E).
In base case, we expect stock could trade at Rs25/share (P/BV 1.3xFY13E).
􀂄 Overall, the risk-reward appears unfavourable owing to regulatory risk at
airports, fuel supply risk, higher execution risk, promoter share pledging at
28.55% and potential equity dilution risk.

GMR INFRASTRUCTURE ‘Extraordinaries’ galore ::Edelweiss

Please Share:: 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’.

Buy GMR Infrastructure; Target : Rs 32:: ICICI Securities

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


N e t   l o s s e s   l o w e r   t h a n   e x p e c t e d …
GMR Infrastructure’s (GMR) Q2FY12 net losses were lower than expected
largely on account of better-than-expected revenues and margin in the
other segment (investment income, project management fees & charter
rental income). During the quarter, GMR agreed to sell a 30% stake in
GMR Energy (Singapore) implying deal value of ~S$50 million and
contributing |1.7/share in our SOTP valuation. We maintain BUY.
ƒ Q2FY12 losses lower than expected…
GMR’s net sales grew 48.3% in  Q2FY12 mainly on account of
consolidation of the Male Airport  (| 225 crore). The net losses came
lower at | 62.5 crore vs. our expectation of | 91.1 crore largely on
account of higher revenues and EBIT margin in the other segment
(includes investment income, project management fees & charter rental
income). The others division revenues grew 56.2% sequentially at |190
crore with the EBIT margin of 77.2% in Q2FY12 (38.4% in Q1FY12).
ƒ AERA, gas allocation uncertainty remains…
The company has raised bridge loan to account for funding shortage
due to suspension of ADF collection at DIAL. We believe any
development on the tariff fixation from AERA will be a key trigger. The
Rajahmundry project is on track and GMR expects the commissioning
of the same by Q4FY12. However,  the uncertainty over gas allocation
for the plant continues to persist.
ƒ Sale of 30% stake in Jurong Island project
During  Q2FY12,  GMR  agreed  to  sell  a  30%  stake  in  GMR  Energy
(Singapore) Pte to Petronas International Corp. The deal was done at a
30% premium to its equity investment (S$127 million) implying a deal
value of ~ S$50 million for a 30% stake.
V a l u a t i o n
At the CMP, the stock is trading at 1.0 FY13 P/BV. With uncertainty over
airport regulation and concern over gas supply looming large, we believe
any positive development on the airport issue will act as a key catalyst for
GMR’s stock price performance. We maintain our BUY recommendation
on the stock with a revised SOTP based price target of | 32/share. We
have now incorporated GMR Energy (Singapore - |1.7/share), EPC
business (|1 /share) and standalone net debt (-|4/share).

GMR- Airports regulator restores airport development fee for DIAL Airports: Nirmal Bang

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Airports regulator restores airport development fee for DIAL
Airports Economic Regulatory Authority (AERA) has allowed charging Rs 200
to domestic passengers and Rs1,300 to international passengers as airport
development fee (ADF) at Delhi International Airport (DIAL) so as to collect
Rs12.3bn in Stage I and Rs7bn in Stage II. The company has planned to
securitise ADF in the next one month to repay short-term loans of Rs6bn,
which will reduce interest costs by around Rs720mn annually. We believe this
is a positive development for the stock and retain our Buy rating on it with a
SOTP-based target price of Rs39.
Key highlights:
AERA has restored levy of ADF at the rate of Rs200 per departing domestic
passenger and Rs 1,300 per departing international passenger so as to garner
Rs12.3bn in Stage I and incremental Rs7bn in Stage II. This levy was
suspended following a Delhi High Court order effective from 1 June 2011.
The collection of Rs12.3bn of ADF is to bridge the financing gap for approved
capex of Rs 118bn which was incurred until 31 March 2010. The collection of
incremental Rs7bn of ADF in Stage II is for certain costs which were not
incurred as on 31 March 2010, but was part of the project cost.
The company has planned to securitise ADF with the banks in the next one
month in order to repay short-term loans of Rs6bn, which were raised post
suspension of ADF levy by the Delhi High Court. This will bring interest costs
down by about Rs720mn annually.
AERA has approved capex of Rs118bn in Stage I, which is Rs10bn lower than
earlier approved capex. Out of the Rs10bn, Rs 7bn will be approved by the
AERA based on the company submitting proof of actual costs incurred. In
respect of the Rs1.5bn upfront fee, the company has reduced this amount from
the project cost and from the means of financing and thereby there is no impact
due to disallowance.
We believe this is a positive development for GMR Infrastructure and retain our Buy
rating on it with a SOTP-based target price of Rs39. Key contributors to our TP
comprise Rs20 from the airports business (including real estate), Rs14 from power
generation and coal mining, and Rs3 from the road segment.

GMR Infrastructure Subdued quarter – Inline performance – Buy ::Emkay

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

GMR Infrastructure

Subdued quarter – Inline performance – Buy

BUY

CMP: Rs 26                                       Target Price: Rs 38

---

n     Net loss at Rs 625mn v/s Rs 483mn - led by marginally lower operational numbers for Power and Airport segment, Roads inline, EPC & other segment ahead of estimates 

n     Rev. up 48.3% to Rs 18.1bn v/s exp. of Rs 17.5bn led by EPC segment +282% yoy to Rs2.9 bn v/s 1.7 bn & others at Rs 1.9bn v/s 1.2bn, EBITDA up 40% at Rs 5bn v/s exp. Rs 4.7bn

n     Delays in aero charge hike at DIAL continue to drag the overall performance. Restriction to collect ADF leading to higher bridge loan & hence higher interest exp.   

n     Maintain BUY rating PT Rs 38 offers 49% upside from the current market price. Peaking interest rates cycle will be the key drivers of value in the near term

Reader Query Corner: South Indian Bank, Jet Airways,Dishman Pharma, Engineers India, PFC, CanFin Homes, MTNL, GMR:: Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Please let me know the short- and medium-term targets for South Indian Bank and Jet Airways.

John

South Indian Bank (Rs 23.6): After retracing 38.2 per cent Fibonacci retracement level of the stock's prior up move from its lifetime high of Rs 29.7 in November 2010, the stock found support at around Rs 19 in February. The price band between Rs 19 and Rs 20 is a significant support band from a long-term perspective.

This support band cushioned the stock from declining further in late August this year. Building a strong base at around Rs 20, the stock resumed its long-term uptrend that has been in place ever since bottoming out in the first quarter of 2009.

The stock is presently testing a key medium-term resistance level around Rs 23.5. Emphatic breakthrough of this level will take the stock northwards to Rs 25.5-26 range in the short-term. Investors with short-term horizon can hold the stock with stop loss at Rs 22. However, a fall below Rs 22 will mar the short-term positive view and pull the stock down to Rs 20.

Strong move beyond Rs 26 will pave the way for a rally to Rs 30 in the medium-term. Investors with a medium-term perspective can consider holding the stock with stop-loss at Rs 20. On the other hand, breach of Rs 20 can drag the stock down to Rs 17 or to Rs 15 in the coming months.

Jet Airways (Rs 251.3): Ever since encountering resistance in the range between Rs 900 and Rs 925 in November 2010, Jet Airways resumed its long-term downtrend. Following a sideways consolidation phase between February and August in the band between Rs 400 and Rs 515, the stock breached southwards.

Subsequently, the stock landed at its long-term significant support at around Rs 220 in early October and is reversing upwards. The stock is currently testing its immediate short-term resistance (late August trough) at Rs 253. Decisive jump above this level will give short-term targets of Rs 285 and Rs 308.

Short-term investors can hold the stock with stop-loss at Rs 230. Medium-term investors can hold the stock with deeper stop-loss at Rs 215. Strong move beyond Rs 308 will take the stock higher to Rs 335, Rs 373 and Rs 400 in the medium-term.

Nevertheless, dive below Rs 215 will pull the stock down to Rs 178 or even further down to its long-term support at around Rs 130.

I got PFC (Power Finance Corporation) through the FPO (Follow-on Public Offer). Please advise if I can buy more shares now.

Srinivasan

PFC (Rs 155.1): In our previous review of this stock in July this year, we had mentioned that inability to move above Rs 250 will mean that the stock can head lower to Rs 150 or Rs 125 over the ensuing months. In line with our view, the stock failed to rally and declined to Rs 150 and then found support just above Rs 125, at Rs 130 in late August 2011.

The support zone between Rs 125 and Rs 130 is an important zone from a long-term perspective. The short-term trend is a sideways consolidation. Investors with higher penchant for risk can consider buying the stock with stop-loss at Rs 125. Strong penetration of resistance at Rs 170 will lift PFC higher to the Rs 215-220 range in the ensuing quarters. The next target is at Rs 250.

However, breach of Rs 125 downwards will reinforce the downtrend that has been in place from its lifetime peak of Rs 383; the stock can roll down to Rs 107 or even to Rs 86 in the long-term.

Kindly let me know the long-term prospects of CanFin Homes and MTNL.

Shantha.D. Pai

CanFin Homes (Rs 103.7): After retracing 61.8 per cent Fibonacci retracement level of the prior up move (from the October 2008 low of Rs 37.5 to August 2010 peak of Rs 172), CanFin Homes took support at its long-term support zone between Rs 85 and Rs 90 during February to August this year, and bounced upwards. Subsequent supports are at Rs 77 and Rs 67.

The stock has been on an intermediate-term downtrend from its August 2010 peak. This trend remains in place as long as the stock trades below Rs 130. Strong weekly close above this level will strengthen the stock's long-term uptrend and take the stock higher to Rs 150 and then to Rs 170. Nonetheless the stock has immediate resistance at Rs 110.

MTNL (Rs 30.9): MTNL has been on a long-term downtrend from its January 2008 peak of Rs 219. Medium- as well as short-term trends are also down for the stock. However, after recording an all-time low at Rs 29.15 on October 24, the stock found support around this level and is on the brink of reversing, triggered by positive divergence in weekly indicators. Only a strong move above Rs 37.5 will signal that the stock has bottomed out, and it can then rally to Rs 41, Rs 48 and 52.

Next significant resistance is at Rs 68. Emphatic breakthrough of long-term key resistance at Rs 90 will reverse the stock's intermediate-term downtrend and lift the stock higher to Rs 110 or Rs 124.

Conversely, inability to rally beyond Rs 37.5 will pull the stock down to Rs 29. On a breach of immediate support level at around Rs 29, will drag the stock to new lows.

I purchased GMR Infrastructure at Rs 70, and Engineers India at Rs 300. I see the prices of both the stocks going down. Could you please let me know the latest supports and resistances?

Pavan

GMR Infrastructure (Rs 27.7): Ever since peaking out in June 2009 at Rs 91, the stock resumed its long-term downtrend. Trends in all time frames are down for the stock, and it is still in the bear's grip. Nevertheless, last week the stock found support just above its long-term support level of Rs 23 (October 2008 trough), and bounced up sharply.

The stock has resistance ahead at Rs 30; a conclusive penetration of this level will take the stock northwards to Rs 34 and Rs 37. Strong rally above its long-term resistance at around Rs 45 is needed to alter its intermediate-term downtrend and take the stock higher to Rs 55-58 range.

Investors can consider switching from the stock in rallies. Tumble below Rs 23 will drag the stock down to Rs 20 and to fresh lows.

Engineers India (Rs 239.8): After peaking out in May 2010 at Rs 538, the stock has been on an intermediate-term downtrend forming lower peaks and lower troughs. In April this year, the stock resumed its downtrend after testing important long-term resistance in the band between Rs 310 and Rs 315.

Since then, it has been on a medium-term downtrend. The stock has retraced 61.8 per cent Fibonacci retracement level of its prior up move from October 2008 low of Rs 50, to its May 2010 peak. Investors with long-term perspective can hold the stock with stop-loss at Rs 215.

A reversal from current levels will face resistance at Rs 260, Rs 290 and Rs 315. Decisive breakthrough of Rs 315 will pave the way for an up move to Rs 350-360 band in the long-term; investors can take partial profits off the table at that juncture. On the other hand, fall below Rs 215 can pull the stock down to Rs 180 and then to Rs 150 levels in the ensuing months.

Please review the long-term prospect of Dishman Pharmaceuticals and Chemicals as earlier stated (May 2011).

Mukesh Kumar

Dishman Pharmaceuticals and Chemicals (Rs 53): In our review of this stock in May this year, we had mentioned that there are no signs of reversal in the stock as yet, and it is likely to breach a low at Rs 87, and decline to the 2004 low of Rs 72 or even Rs 61. Investors should have divested their holding on a decline below Rs 87.

In line with our expectation, the stock breached Rs 87 and continued to decline. It has even declined below Rs 61 to register its lifetime low at Rs 52.3 on October 28. The stock is in a longer-term downtrend. Upward reversal will encounter resistances at Rs 61, Rs 72 and Rs 87.

Dynamic move above Rs 87 will take the stock higher to Rs 110 or Rs 120. Failure to surpass Rs 87 will reinforce the downtrend. Investors can make use of rally to switch out of the stock. Only on a strong close above Rs 250 will reverse the long-term downtrend.

GMR Infrastructure - Mgmt confident of Ahd-Kishangarh delivering value:Emkay,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

GMR Infrastructure

Mgmt confident of Ahd-Kishangarh delivering value

BUY

CMP: Rs26                                        Target Price: Rs38

---

n     Management expects Ahmedabad – Kishangarh project to deliver 24% equity IRR, driven by traffic growth expectation of 8% CAGR for 26 years v/s our base case of 5.7% for DMIC

n     FY13-16E toll rev CAGR of ~23% looks optimistic - Normal traffic growth est of 7% in initial yrs, yields us equity IRR of 12%. Toping up EPC margins could drive IRR to 15%

n     Male airport hold promise with its ability to internally fund equity.  ~80% of revenues comprise of fuel trade driving the near term profitability. Real estate opportunity at 37 acres

n     Maintain BUY rating PT Rs 38 offers 46% upside from the current market price. Peaking interest rates cycle will be the key drivers of value in the near term

Buy GMR; Target :Rs 35::ICICI Securities,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


S t a k e   s a l e   i n   J u r o n g   I s l a n d   p r o j e c t   …
GMR Infrastructure (GMR) has agreed to sell a 30% stake in GMR Energy
(Singapore) Pte to Petronas International Corp. The deal has been done at
a 30% premium to its equity investment (S$127 million). Based on this
deal, GMR’s investment in the Jurong  Island project is valued at S$165
million implying contribution of |  1.6 per share. Furthermore, GMR has
announced that it has received letter of award for six laning of the biggest
stretch (Kishangarh-Udaipur-Ahmedabad stretch) covering 555 km.
ƒ Stake sale of 30% in Jurong Island project
GMR has agreed to sell a 30% stake in GMR Energy (Singapore) Pte to
Petronas International Corp. This deal has been done at 30% premium to
its equity investment (S$127 million). This implies a deal value of ~ S$50
million for a 30% stake. The transaction also values GMR’s investment in
Jurong Island project at S$165 million (S$115 million for 70% stake value
+ S$50 million as cash) from the deal implying contribution of |1.6/share
for GMR’s investment in the Jurong Island project. The Singapore unit is
developing a gas based 800 MW power project on Jurong Island. Total
cost of the project is S$1175 million with debt of S$670 million, equity of
S$127 million and shareholders’ loan of S$378 million.
ƒ Bags first mega project from NHAI
GMR has also bagged the mega project for six laning of the KishangarhUdaipur-Ahmedabad stretch. It is the biggest road project awarded by
NHAI covering 555 km (3336 lane km). Media reports indicate that the
project cost is ~| 7200 crore and the concession period is 26 years.
GMR will pay a premium of | 636 crore p.a. with 5% hike every year.
V a l u a t i o n
At the CMP, the stock is currently trading at an attractive valuation of 1.1x
FY13 P/BV. Hence, we are upgrading it to BUY recommendation with an
SOTP price target of | 35/share. We have not incorporated the Singapore
investment and mega project in our SOTP valuation. From a stock
performance point of view, we believe the implementation of regulated
tariff for DIAL and the PPA agreement for the power project under
development would act as key catalysts.

UBS- GMR Infrastructure; To sell 30% stake in Island Power at 30% premium 􀂄 price target of Rs38

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
GMR Infrastructure
To sell 30% stake in Island Power at 30%
p remium
􀂄 Event: to sell 30% stake in 800MW Island Power project to Petronas
GMR will sell a 30% stake in Island Power to Petronas of Malaysia. The company
had earlier indicated that it is looking at divesting its stake partially in this project
(please refer to our note ‘Island Power: Company expects high project
profitability’ dated 9 September 2011). It will not look for further partners in this
project as of now. Our sum-of-the-parts (SOTP) valuation currently does not
include any value for this S$1.2bn project.
􀂄 Impact: to realise part of the project value upfront
This stake sale lends confidence to the overall project profitability (GMR had
earlier stated that it expects equity IRRs of about 18% from this project), in our
view (this is GMR’s only power project outside India). It enables the company to
realise some value upfront (GMR could realise about S$50m from the stake sale)—
the project is likely to be commissioned in Q413. The net equity investment from
GMR (parent) in this project is now likely to be about S$32m.
􀂄 Action: expects 555km Kishangarh-Ahmedabad project cost to be Rs72bn
GMR has been formally awarded the project and it expects a total cost of Rs72bn
(NHAI estimate was Rs54bn). The company stated that it has studied the traffic
patterns on this corridor for about two years and expects growth to be robust given
the project covers 39% of the Delhi-Mumbai Golden Quadrilateral.
􀂄 Valuation: Buy rating with SOTP-based price target of Rs38
We have a Buy rating and the risk-reward profile is favourable, in our view.

GMR Infrastructure- Closer to stress case valuations ::Macquarie Research,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


GMR Infrastructure
Closer to stress case valuations
Event
􀂃 We met with GMR senior management to get further clarity on regulatory
uncertainties in the airport sector and the fuel security issue in power vertical.
􀂃 We conducted a stress test by building higher cross-subsidy and delay in land
monetisation at Delhi airport and lower PLFs at power plants. Our stress test
indicates limited downside of 20% from current levels.
Impact
􀂃 Imported coal to sort fuel security issue: The company expects production
ramp-up in the overseas coal blocks, which should account for any shortfall
from local sources. GMR expects to trade coal in the interim period until its
power projects are commissioned.
􀂃 AERA regulations expected soon could be a game changer: Management
is confident about getting approval for additional ADF (airport development
fees) in the very near term. GMR has received in-principle approval from the
Supreme Court and the airport regulator (AERA). If approved, ADF would total
Rs33bn (25% of Delhi airport’s project cost). The company also expects
clarity on the tariff regulation for Delhi airport soon.
􀂃 Equity funding tied up for next 12–18 months: The company has raised
US$815m over FY11 through dilution in the holding company and subsidiary
companies. It does not expect large funding requirements for incremental
projects such as the mega US$1.5bn road project. GMR indicated that it
would be interested in projects that have operational cashflow (such as NH
road widening, expansion of operational airports like Male airport).
Earnings and target price revision
􀂃 No change.
Price catalyst
􀂃 12-month price target: Rs44.00 based on a Sum of Parts methodology.
􀂃 Catalyst: Delay in fixation of airport charges and lack of fuel security
Action and recommendation
􀂃 Risk-reward favourable, regulatory issues need to be addressed: At the
current price of Rs27, the market seems to be building in the worst for the
company – high delay in monetisation and tariff regulation for Delhi airport,
and lower PLFs for power plants.
􀂃 Stress test indicates downside limited: We stress test the company’s
valuation by building in a delay in Delhi airport land monetisation, tariff
regulation coming in Delhi airport from FY14 instead of FY13 with 50% nonaero
revenues cross-subsidy (instead of 30% expected), and lower PLFs of
60% for all power plants. Our stress case valuation of Rs22/sh indicates a
limited downside of 20% from current levels.

GMR Infrastructure (GMRI.BO, Neutral) Diverse infrastructure asset portfolio – Goldman Sachs,

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

GMR Infrastructure (GMRI.BO, Neutral)
Diverse infrastructure asset portfolio – valuations are beginning to look fair but most projects are still
not free cash flow generating, and concerns remain over aggressive bidding and changes in policy
 Attractive exposure to high growth areas such as airports (stakes in Hyderabad, Delhi, and Istanbul airports),
power generation (823 MW operational, rising to 3813 MW by 2013), roads (255km annuity and 166km toll
roads), and special economic zones (3,300 acres).
 Substantial value of airport assets to come through real estate development (1,750 acres). However, the nearterm
benefits of this may be low and the regulatory overhang on the treatment of real estate remains.
 The power assets currently under construction & development (2,990 MW) would also start contributing
value only in FY13. The company’s plant in Andhra Pradesh will continue to struggle for lack of uninterrupted
gas supply.
 Ytd, the stock has underperformed the Sensex by 20% but outperformed GVK Power by 19% due to: (1) its
longer gestation projects still needing incremental capital, (2) concerns over higher interest rates and the
company’s leverage, and (3) policy decisions still pending from airport regulator.
Catalyst
 Timely execution on projects, especially in the power segment over the next 12 months.
 Delay in real estate development at airport assets and inclusion of real estate sales in calculating regulated
airport capex by the airport regulator (AERA).
Valuation
 We maintain our Neutral rating on the stock as we believe that value in GMR Infrastructure’s asset base will
have to be balanced with fewer assets being operational at any one time.
 We change our FY12/FY13/FY14 EPS estimates by -118%/-25%/14% to reflect higher interest expenses than
earlier forecasted and higher depreciation on the New Delhi Airport Terminal (DIAL).
 Based on the above-mentioned factors we lower our 12-month SOTP-based target price to Rs37 (from Rs45)
in addition to rolling forward our target price by 6 months to the average of FY12E-FY13E.
Key risks
 Upside: (1) Monetization of real estate, and (2) any favorable airport regulation from AERA and approval of
capital expenditure.
 Downside: (1) Prolonged weakness in traffic, (2) delay in power plant commissioning, and (3) an inability to
raise finances when required.

Read about other companies in sector recommended by Goldman Sachs and top picks in link below:

Goldman Sachs:: Slowdown in capex continues: Sector at trough valuations

UBS ::GMR Infrastructure -- Island Power: Company expects high project profitability

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
GMR Infrastructure
Island Power: Company expects high
p roject profitability
􀂄 Event: GMR expects equity IRRs of ~18% in Island Power project
GMR today organized a presentation on the 800MW Island Power project
(Singapore power company acquired from Intergen). The ~SGD1.2bn project is
likely to be commissioned in Q4CY13. Equity investment from GMR (parent) will
be less than SGD100m. Project financing has been secured and the liability of
GMR (parent) is limited to US$100m. Our SOTP currently does not include any
value for Island Power. This project is not a part of GMR Energy currently.
􀂄 Impact: Higher returns at GMR parent level due to project structuring
IRR to GMR, the project sponsor, will likely be higher at ~20%, due to funding
structure- ~75% of the equity funding will be through subordinated shareholder’s
loan taken from Indian banks. The interest cost on this loan will be ~SGD20m,
less than the fees that GMR will likely earn from the project company (success fee
and O&M fees- both approved by project lenders).
􀂄 Action: Likely to dilute ~30% stake in the project
GMR could dilute ~30% stake in the project over the next few months. Fuel supply
agreement has been signed, EPC contract has been awarded and construction has
commenced. This project is likely to have higher efficiencies than other generation
companies in the region due to usage of latest technology and hence better returns.
􀂄 Valuation: Buy rating with SOTP-based PT of Rs38
We have a Buy rating and long-term risk-reward is favourable in our view.


Profitability: This plant is likely to have higher efficiencies (by 5-6%)
compared to other power generating companies in the region (due to better
technology, it being a new construction) and given that pricing is largely similar
across power producers, it expects higher profitability. At the project level,
equity IRRs are expected to be ~18% and at GMR level it could be ~20% (due
to the funding structure).
Valuation
Our SOTP valuation for GMR is as follows (with individual assets being valued
on DCF). We have not included 1) Island Power, 2) power transmission projects
(400KV 386 circuit kms in Rajasthan; financial closure to be achieved soon) and
3) Kakinada SEZ (master-planning of the port about to be completed as per
news reports) and 4) the hydro-power projects (early development stage) in our
valuation.


􀁑 GMR Infrastructure
GMR is one of India's leading infrastructure developers, with an asset portfolio
(attributable) of: (1) 765 acres of real estate near Delhi and Hyderabad airports;
(2) about 3,900MW of power capacity (+4,100MW at an early development
stage); (3) three airports with ultimate pax handling of 89m; (4) eight road
projects (more than 520km); (5) three SEZs of more than 3,400 acres; and (6)
stakes in coal mines with mineable reserves of over 150m tons. Additionally,
GMR holds 50% of Intergen, which has global power assets of 6,600MW (and
2,700MW under development).
􀁑 Statement of Risk
In our view the key risks for GMR with regard to airport projects are: a)
execution delays; b) regulatory risks related to revenue; and c) traffic risks. With
regard to power projects, we believe the key risks are: a) shortages in fuel
supply; and b) collection risks. For road projects: a) traffic; and b) collection are
key risks. All of GMR’s projects face interest rate-related risk.

GMR Infrastructure - Long term play… but worth the wait BUY :: Emkay

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

GMR Infrastructure

Long term play… but worth the wait

BUY

CMP: Rs30                                        Target Price: Rs38

---

n     Airports – Investment phase over – DIAL turnaround holds the key. Airport vertical turning cash positive with Rs 2.8bn in FY13E v/s cash loss of Rs 1.1bn in FY12E

n     Power – 4.5x growth in installed capacity by FY14E to 3,600MW & ~54% contribution to EBITDA. Captive mining offers strong fuel security for smoother operations

n     Short term funding comfort – Strong parent B/S with Rs 50bn cash & internal accruals (Rs104 bn) sufficient till FY14E. Future needs to be met by listing of power & airport verticals

n     Recommend BUY with a target SOTP of Rs38 (27% upside). Key triggers: Tariff implementation, land monetization & captive mining. Risks – Further dilution not ruled out

GMR Infrastructure - Takeaways from management meet:: BofA Merrill Lynch,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


GMR Infrastructure Ltd.
   
Takeaways from management
meet
„Management remains optimistic
As per meeting with GMR’s management, (a) bulk of capex is towards brownfield
projects, but only in airports and roads and not in power, in our view where it is
green-field; (b) CF concerns to ease out as 3 power / 3 roads is operational by
FY13E and new projects (Male airport, Indonesian mine and AhmedabadKishangarh road) would be mainly self-financed, which looks challenging;
(c) regulatory challenge in airport and realty monetization is deferred; and
(d) grow internationally, mainly in airports and resources. Reiterate U/PF with PO
Rs29 (offers amongst lowest upside of 4% in our coverage) on higher execution
risk as 80% of capex is on green-field projects, deferment of realty monetization.
Regulatory issues at airport / realty monetization deferred
The management is hopeful of (i) getting ADF approval for Delhi airport by
Sep’11, but capex approval / tariff would take few months (ii) achieving breakeven
in Sabiha Gokchen airport by FY13 and (iii) a favourable outcome against ‘single
till’ at Hyderabad airport. Realty monetization at Delhi airport is deferred atleast by
a year (from FY14 onwards) waiting for completion of existing hotels.
Execution and fuel remains the biggest challenge in power
Management expects the 3 power plants (capacity 2.8GW) to become operational
by 3QFY13E (vs BofAMLest by 1QFY14E). While GMR’s 768MW project is on
priority list for gas supply, pooling mechanism, if available, is an option. Domestic
coal need to be blended with imported coal, but a tariff of ~ Rs3.75 - 4/unit is
required for reasonable return. On Singapore plant, a return of 18% is expected.
International venture restricted to airport/resources
On international venture, the management clearly indicated that going forward, it
is looking to expand mainly (i) in airports – by participating in transparent bidding
process, given limited opportunities available in India and (ii) in resources to
secure the coal sourcing for their power expansion plans in India.

GMR Infrastructure Ltd. — Challenging times ahead, Downgrade to Underperform ::BofA Merrill Lynch,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


GMR Infrastructure Ltd. — Challenging times
ahead, Downgrade to Underperform
Country Overview
Cut rating and PO
While the stock has underperformed the market by 19% YTD, we see limited
upside potential of 10% – amongst the lowest in our coverage and are cutting our
rating to Underperform with a revised PO of Rs29 (from Rs42). This is due to: (a)
continual losses in FY12E / marginal profit in FY13E led by lower profitability from
airport/ power vertical, (b) deferment of real estate monetization at Delhi airport,
and (c) higher execution risks as capex going forward is largely in green-field
projects.
Shift turnaround to FY13E / Deferred realty monetization
Airport is estimated to have losses in FY12/13E (vs profit in FY13E earlier) due
to: lower revenue in Turkey / Male airport, higher operational expense, higher tax
at Hyderabad airport and losses at Delhi airport. On power, lower PLF and a
change in coal mix by blending linkage coal with e-auction / imported coal (at 1.5-
2.5x linkage price) led to lower earnings. The realty monetization (leasing) is
expected to be delayed by a year (from FY14) (largest component in our SoTP at
30%) as primary concern remains on obtaining capital cost / ADF approval + tariff
hike.
Higher execution risk, but on upside, has 60% upside pot.
The trailing five years had ~80% of capex on brown-field projects as GMR
completed 3 airports, 4 roads and 2 power plants. Going forward, this would
reverse as ~80% of the capex worth Rs567bn over next few years is on greenfield
projects (in power) entailing greater execution risk vs brown-field sites. Key
upside risk includes higher short-term tariffs, lower interest rates, faster realty
monetization at higher realization and lower fuel price. We estimate that the
valuation of GMR could be Rs42 under the following scenario: (a) lower usage of
imported coal (b) lower gas price by USD 1/mmbtu and e-auction price declined
by 25%, (c) ST realization up by Rs 0.5/unit, and (d) realty monetization
commences next year at 25% higher realization.


GMR Infrastructure Ltd. (GMRLF)
Our PO of Rs29 is based on Sum-of-the-parts valuation using DCF as the main
approach with varying cost of equity. SoTP comprises:
1) Airports - Rs25 (87% of SoTP), based on DCF for the 4 airports using CoE of
12-14% and Delhi realty at CoE of 18% - in line with other realty peers. The
estimated value of Delhi airport, including realty, is Rs16/sh, while both the
international airports at Male/Sabiha Gokcen are valued at Rs5/sh
2) Power - Rs4 (13% of SoTP), based on DCF for 3.6GW of operating/under
construction assets using CoE of 14-16%. Also, Indonesia coal mines is valued
on DCF at 18% CoE, and 800MW power plant in Singapore at book value
3) Roads - Rs2 (6% of SoTP), based on DCF using CoE of 14-16% for the 9
concession projects.
4) Others - Rs6 (20% share) include EPC division, valued on EV/EBITDA 6x
FY13E - in line with other mid-cap construction peers, SEZ, investments and
cash, liquid investments less parent debt at book value and NPV impact of private
equity investment.
Risks are: higher short-term tariffs, lower interest rates, faster realty monetization
at higher realization and lower fuel price.