IDFC Securities - GMR Infrastructure (GMRINFRA) GMR Infrastructures Q1FY20 results (Outperformer) - Demerger of airport business to drive stock performance

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IDFC Securities

Shirish Rane

GMR Infrastructure's Q1FY20 results (Outperformer) - Demerger of airport business to drive stock performance

Q1FY20 result highlights

GMR Infrastructure (GMR) revenues grew by 14% yoy to Rs15.0bn led by increase in rental (post Bharti Relaty deal for Delhi Airport) and increase in base airport charges at Delhi pursuant to AERA order (for base airport and baggage X- ray charges) offset by decline in passenger growth at Delhi Airport. Airport revenues were up by 16% Airport revenues increased by2%unting changes (trading business not accounted for revenue in FY19). Airport revenues in Q1FY20 led by 6% growth in aero and 184% growth in rental revenues. EBITDA for airport business was Rs5.4bn, +40% growth yoy
unting changes (trading business not accounted for revenue in FY19). Airport revenues Warora and Kamalanga PLF was quarter with 88% (vs 81% in Q1FY19) PLF and77% (vs 83% in Q1FY19) PLF for Q4FY19/FY19. As a result, aided by positive orders, power assets reported EBITDA of Rs3.1bn (Vs Rs2.2bn in Q1FY19). Other income came in at Rs2.1bn (vs Rs1.3bn in Q1FY19) .Note that there was restructuring of debt at Rajahmundry and divestment of GMR Chhattisgarh to Adani Power in Q1FY20.
Consolidated EBITDA was Rs5.9bn, +37% up yoy. As a result, GMR Infrastructure’s (GMR) Q1FY20 adjusted net loss came in at Rs5.1bn (vs loss of RS2.9bn in Q1FY19 and est. of loss of Rs4.7bn) led by higher interest cost (likely due to rise in corporate debt)
GMR entered into a shareholder agreement to sell 44% stake in airport business to Tata Sons, GIC and SSG at an EV of Rs225bn (Rs180bn base EV + Rs45bn earn outs). The company will sell stake worth Rs70bn and issued primary capital of Rs10bn. Net debt is likely to halve after completion of the deal. Note that post the earn outs, the GIL stake will increase to 62%.
Management alluded to a restructuring of the business into two separate verticals a) airport business b) Power and urban infrastructure business post the completion of stake sale in airport.

Key positives: Proposed restructuring of business

Key negatives: High corporate debt of Rs47.1bn (ex-FCCBs of Rs20bn).

Impact on financials: Maintain our estimates for FY20E/FY21E

Valuations & view

GMR’s has entered into an agreement to sell 44% stake in airport business and a large part of proceeds utilise the money to repay corporate debt. Airport business is witnessing sustained business momentum with DIAL monetising a 5 mn sqft with Bharti Realty with an option to monetise further 5mn sqft at attractive valuation. GMR is looking to demerge its airport business which will create value for shareholders. Maintain Outperformer with a TP of Rs23.â€‹

20/08/2019 1 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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