IDFC Securities - GMR Infrastructure (GMRINFRA) GMR Infrastructures Q1FY19 results (Outperformer) - Runway cleared for Airports business take-off

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IDFC Securities

Shirish Rane

GMR Infrastructure's Q1FY19 results (Outperformer) - Runway cleared for Airports business take-off

Q1FY19 result highlights

GMR Infrastructure’s (GMR) Q1FY19 net loss came in at Rs2.9bn, lower than our estimated net loss of Rs3.5bn, due to lower interest cost and tax credit and also due to higher revenue and stronger margins in the Indonesian mining business (PT GEMS, 30% stake).
Consolidated net revenue declined 32.1%yoy to Rs13.2bn, below estimate of Rs17.5bn. The yoy decline in revenue is led by sharp cut in aero tariff in DIAL and also due change in accounting for power trading business wef April 2018 (reported net of power purchase cost as per Ind-AS 115). EBITDA declined 48.6%yoy to Rs4.4bn, below estimate of Rs5bn, due to forex loss of Rs981m in DIAL. EBITDA margin declined 1060bp yoy to 33% (est: 28.6%). Other income grew 12.1%yoy to Rs1.3bn (in line) and Interest cost declined 0.3%yoy and 14.4%qoq to Rs5bn as against estimate of Rs5.9bn. Net debt (ex-FCCBs) grew Rs4.2bn qoq to Rs151.5bn (8.7x TTM EBITDA) as on Jun-18 mainly due to forex impact on account of INR depreciation.
Passenger traffic at various airports remained strong and grew 12.1%yoy in DIAL, 23.8%yoy in GHIAL and 12.5%yoy in Cebu. PLF at Kamalanga and Warora surged to 82.8% (65.1% LY) and 81.3% (76.6% LY), respectively. PT GEMS reported a PAT of Rs3.2bn (100% basis, Rs2.1bn in Q1FY18) led by 64.7% growth in sales to 5.6mt and 11.7% yoy increase in realizations.

Key positives: Strong growth in air traffic and improvement in PLFs.

Key negatives: High corporate debt of Rs45.5bn (ex-FCCBs of Rs20bn).

Impact on financials: Decrease in FY19E/20E net loss to Rs11bn/11.3bn from Rs12.3bn/Rs12.9bn.

Valuations & view

GMR’s Airport business continues to witness significant strength and TDSAT’s recent order granting DIAL return on RSD is an added positive. Further AERA’s recent consultation paper on granting base charges for DIAL establishes DIAL’s long term economic viability. Further, GMR has reached a settlement agreement with PE investors in GMR Airports. We believe this paves way for a speedy resolution of the dispute with the investors. An imminent IPO of the business is a near term trigger for the stock besides potentially reducing the corporate debt levels. The twin operating plants of Warora and Kamalanga have operationally turned around led by tariff hikes and improved fuel supplies. The stock trades at 2.8x FY19E P/B. Maintain Outperformer with a TP of Rs25.

24/08/2018 10 EN

Underlying

GMR Infrastructure

GMR Infrastructure is engaged in infrastructure management with interests in airports, energy, highways and urban infrastructure sectors. Co. operates India's busiest airport, the Indira Gandhi International Airport in New Delhi, where it has built a brand new integrated terminal T3. Co. has 15 power generation assets of which eight are operational and seven are under various stages of development. Co.'s highway business has eight road assets with seven operational highways. Four projects are on annuity model and four are toll based, with one project under development. In addition to property development and construction, Co. promotes a cricket team, the Delhi Daredevils.

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INE776C01039 National Stock Exchange of India India

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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Analysts

Shirish Rane

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