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UBS Investment Research
GMR Infrastructure
O perating performance ahead of estimates
Event: Operating profit up 32% y/y; ahead of UBS and street expectations
GMR reported Q1FY12 operating profit of Rs5bn (UBS-e Rs4.7, consensus
Rs4.4bn) and Net loss of Rs667m (below UBS-e of Rs724m and above street
expectations of Rs167m). There was exceptional loss of Rs160m on closure of
international operations and Rs60m on forex losses on international loans.
Impact: Targets equity IRR of 18% on toll-road projects
GMR stated that the recently won Ahmedabad-Udaipur-Kishangarh project covers
40% of the Mumbai-Delhi GQ. The company expects robust traffic growth given
that the DMIC has also been announced. Equity IRRs are expected to be above the
internal hurdle rate of 18%. GMR draws comfort from govt assurances for gas
availability for the Rajahmundry project. The company shared no specific
timelines for monetization of next tranche of real estate in Delhi. Rs20bn of
funding is available for equity investments- more than current year requirements.
Action: ADF approval expected in the next couple of weeks
Other key developments include- 1) Levying of US$25 (Development Fee) per
international departing pax has been notified by the govt for the Male airport- to be
levied from Jan next year, 2) MRO facility in Hyderabad to commence operations
by October, 3) Indonesian coal mines to produce coal from next quarter, 4)
Homeland Energy to report profits from next quarter and 5) Island Power is
expected to be commissioned in 4Q13 (financial closure achieved).
Valuation: Buy rating with SOTP-based PT of Rs38
We have a Buy rating and long-term risk-reward is favourable in our view.
Conference Call highlights:
Ahmedabad-Udaipur-Kishangarh project: Project IRRs are expected to
exceed the internal hurdle rate of 18% (18% of toll projects, 16% for
annuity) and the company expects good traffic growth given the
announcement of DMIC (though not in double-digits).
Rajahmundry project: On gas availability, GMR draws comfort from the
assurance given by the government and keeping the project ready. The
company expects to sell 75-80% on PPA basis (to be tied-up closer to COD)
and 25% on merchant basis.
DIAL land monetization: No concrete timelines shared for the next phase.
DIAL: Short-term loans of Rs5.3bn at interest rate of 10-11% taken till the
time ADF levy is re-started. This has also impacted profits in the quarter
(though will be recovered later on). DIAL profits boosted by cost reduction
(also done in Hyderabad airport) and also because consultation fees are no
longer there.
MIAL: Notification for levy of ADF of US$25 per departing international
passenger done- to be levied from Jan next year- will amount to ~US$25m
per year.
Sabiha: New levy of Euro5 per transiting pax levied. To break-even in next
4-6 quarters and then report profits,
Male airport: Profits were lower due to seasonality impacting pax traffic
and also due to one-time consultancy works.
EPC: Significant increase due to the three under-construction road projects.
Revenues to be sustained till 2012-end. Post that it depends on new project
wins.
Gas availability: Available for 75% PLF for Vemagiri project in Q1- though
plant operated at 86% due to efficiency gains; operating at same rates in
current quarter. Barge-mounted plant had a PLF of 66% in Q1 while
currently it is about 74%.
Merchant tariff: Realized Rs4.11 per unit in the barge-mounted plant.
Island Power: Fuel supply agreement with BG for 15yrs. Pricing formula
linked to crude. Gas price is pass through. 20-25% expected to be merchant
capacity.
Road segment: Expected to report profits by year-end.
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.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
GMR Infrastructure
O perating performance ahead of estimates
Event: Operating profit up 32% y/y; ahead of UBS and street expectations
GMR reported Q1FY12 operating profit of Rs5bn (UBS-e Rs4.7, consensus
Rs4.4bn) and Net loss of Rs667m (below UBS-e of Rs724m and above street
expectations of Rs167m). There was exceptional loss of Rs160m on closure of
international operations and Rs60m on forex losses on international loans.
Impact: Targets equity IRR of 18% on toll-road projects
GMR stated that the recently won Ahmedabad-Udaipur-Kishangarh project covers
40% of the Mumbai-Delhi GQ. The company expects robust traffic growth given
that the DMIC has also been announced. Equity IRRs are expected to be above the
internal hurdle rate of 18%. GMR draws comfort from govt assurances for gas
availability for the Rajahmundry project. The company shared no specific
timelines for monetization of next tranche of real estate in Delhi. Rs20bn of
funding is available for equity investments- more than current year requirements.
Action: ADF approval expected in the next couple of weeks
Other key developments include- 1) Levying of US$25 (Development Fee) per
international departing pax has been notified by the govt for the Male airport- to be
levied from Jan next year, 2) MRO facility in Hyderabad to commence operations
by October, 3) Indonesian coal mines to produce coal from next quarter, 4)
Homeland Energy to report profits from next quarter and 5) Island Power is
expected to be commissioned in 4Q13 (financial closure achieved).
Valuation: Buy rating with SOTP-based PT of Rs38
We have a Buy rating and long-term risk-reward is favourable in our view.
Conference Call highlights:
Ahmedabad-Udaipur-Kishangarh project: Project IRRs are expected to
exceed the internal hurdle rate of 18% (18% of toll projects, 16% for
annuity) and the company expects good traffic growth given the
announcement of DMIC (though not in double-digits).
Rajahmundry project: On gas availability, GMR draws comfort from the
assurance given by the government and keeping the project ready. The
company expects to sell 75-80% on PPA basis (to be tied-up closer to COD)
and 25% on merchant basis.
DIAL land monetization: No concrete timelines shared for the next phase.
DIAL: Short-term loans of Rs5.3bn at interest rate of 10-11% taken till the
time ADF levy is re-started. This has also impacted profits in the quarter
(though will be recovered later on). DIAL profits boosted by cost reduction
(also done in Hyderabad airport) and also because consultation fees are no
longer there.
MIAL: Notification for levy of ADF of US$25 per departing international
passenger done- to be levied from Jan next year- will amount to ~US$25m
per year.
Sabiha: New levy of Euro5 per transiting pax levied. To break-even in next
4-6 quarters and then report profits,
Male airport: Profits were lower due to seasonality impacting pax traffic
and also due to one-time consultancy works.
EPC: Significant increase due to the three under-construction road projects.
Revenues to be sustained till 2012-end. Post that it depends on new project
wins.
Gas availability: Available for 75% PLF for Vemagiri project in Q1- though
plant operated at 86% due to efficiency gains; operating at same rates in
current quarter. Barge-mounted plant had a PLF of 66% in Q1 while
currently it is about 74%.
Merchant tariff: Realized Rs4.11 per unit in the barge-mounted plant.
Island Power: Fuel supply agreement with BG for 15yrs. Pricing formula
linked to crude. Gas price is pass through. 20-25% expected to be merchant
capacity.
Road segment: Expected to report profits by year-end.
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.
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