GMR Infrastructure's Q3FY19 results (Outperformer) - Demerger of airports to unlock value…
Q3FY19 result highlights
- GMR Infrastructure (GMR) reported steeper than estimated loss led by provision for cost escalation of Rs1bn in the EPC business and higher interest costs. Performance of the airports business continued to remain strong. Q2FY19 net loss came in at Rs6.7bn, higher than our estimate of net loss of Rs3.5bn.
- Consolidated net revenue (net of revenue share) declined 11%yoy to Rs15.1bn. EBITDA declined 14.2%yoy to Rs4.1bn, below estimate of Rs5.2bn, mainly due to Rs1bn provision in the EPC business. EBITDA margin declined 560bp yoy to 27.4%. Other income declined 21%yoy to Rs1.6bn on a high base and interest costs grew 13.4%yoy to Rs7.2bn led by additional interest on NCDS of Rs20bn, term loan of Rs15bn raised for settlement with PE investors in airports and INR depreciation. Net debt (ex-FCCBs) increased Rs46.2bn qoq to Rs200bn as on Dec-18 due to additional debt taken over and cash utilised for capex in DIAL.
- Passenger traffic at airports remained buoyant and grew 3%yoy in DIAL, 15%yoy in GHIAL and 21%yoy in Cebu. PLF at Kamalanga grew yoy from 54% to 74% and in Warora PLF grew yoy from 65% to 75%.
- GMR has formed a sub-committee to evaluate demerger of its Airports business thus paving way for unlocking value and also raising growth capital in the Airports business. Also, DIAL has approved land monetization of upto 10m sqft for commercial development (in two phases of 5m sqft each.
Key positives: Strong performance in the airports business.
Key negatives: Increase in corporate debt.
Impact on financials: Increase in FY19E/20E net loss to Rs17.4bn/15.9bn from Rs13.4bn/Rs14bn due to increase in interest costs towards debt/NCDs assumed for settlement with the PE investors in airports.
Valuations & view
GMR’s Airport business continues to witness significant strength and TDSAT order granting DIAL return on RSD is an added positive. Further, implementation of Base Airport Charges for DIAL will boost its annual revenue by ~Rs1bn and establish its long term economic viability. GMR’s plans of demerger of its Airports business will unlock value in the business even as we await clarity on the route the company take to reduce its holding company debt in the absence of IPO of Airports. Stock trades at 2.4x FY19E P/B. Maintain Outperformer with a TP of Rs23.
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.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.