GMR Infrastructure's Q4FY18 results (Outperformer) - Strong growth in airports and surge in mining profits
Q4FY18 result highlights
- GMR Infrastructure’s (GMR) Q4FY18 adjusted net loss came in at Rs799m, lower than our estimated net loss of Rs5.3bn, led by higher profit from Kamalanga and Warora power plants on account of additional revenue from change in law and coal cost pass through and also due to higher revenue and stronger margins in the Indonesian mining business (PT GEMS, 30% stake).
- Consolidated revenue declined 12.7%yoy to Rs17.1bn (largely in line), EBITDA declined 55.7%yoy to Rs4.1bn (est: Rs4.8bn) and EBITDA margin declined to 24.2% from 47.6% in Q4FY17 (est: 27.5%) led by sharp cut in aero tariff/revenue in DIAL and also due to higher opex in DIAL. Implementation of interim tariff order at Delhi airport from 7th Jul 2017 led to lower revenue (Rs8.4bn, -23.2%yoy) and PAT (Rs1.4bn, -23.2%yoy) in the airport segment.
- Energy segment reported a strong revenue growth of 22.5%yoy and 62.5%qoq to Rs13bn led by additional revenue of Rs3.5bn in Kamalanga power plant and Rs2.8bn in Warora power plant from change in law and coal cost pass through (also includes Rs1.8bn of arrears). PT GEMS reported a PAT of Rs2.8bn (100% basis, Rs1.2bn in Q4FY17) led by 137% growth in sales to 6.4mt and 15.4% yoy increase in realizations.
- Net Debt (ex-FCCBs) grew Rs4.3bn qoq to Rs147.3bn (6.7x FY18 EBITDA).
Key positives: Strong growth in air traffic and improvement in PLFs.
Key negatives: High corporate debt of Rs47.1bn (ex-FCCBs of Rs20bn).
Impact on financials: Increase in FY19E/FY20E net loss to Rs12.3bn/Rs12.9bn from Rs11.7bn/Rs11.3bn.
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. The twin operating plants of Warora and Kamalanga have operationally turned around led by tariff hikes and improved fuel supplies. A value unlock in the airports business is a near term trigger for the stock besides potentially reducing the corporate debt levels. The stock trades at 2.4x FY19E P/B. Maintain Outperformer with a price target of Rs25.
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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