IDFC Securities - GMR Infrastructure (GMRINFRA) GMR Infrastructures Q4FY19 results (Outperformer) - Marquee deal for airport business

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IDFC Securities

Shirish Rane

GMR Infrastructure's Q4FY19 results (Outperformer) - Marquee deal for airport business

Q4FY19 result highlights

GMR Infrastructure (GMR) revenues declined by 10.4% yoy to Rs15.3bn as (trading is netted off revenue in Q4FY19. Airport revenues were up by 12% Airport revenues increased by2%unting changes (trading business not accounted for revenue in FY19). Airport revenues in Q4FY19 led by 17% growth in aero revenues and 11% growth in non-aero revenues.
FY19 airport revenues declined by 3% owing to sharp cut in DIAL Tariff in Q2FY18 post Supreme Court directed to implement tariff order. As a result, aero revenues declined by 24% in FY19 while non Aero revenues grew by 16% on back of healthy growth in traffic.
unting changes (trading business not accounted for revenue in FY19). Airport revenues Warora and Kamalanga reported operationally better quarter with 85%/74% (78%/71%) PLF and 66%/73% (vs 65%/61%) PLF for Q4FY19/FY19. As a result, aided by positive orders, power assets reported a Rs3.1bn/Rs3.2bn in Q4FY19/FY19 (Vs Rs3.1bn/Rs1.1bn). Other income came in at Rs3.2/7.2bn (vs Rs2.1/5.5bn in Q4FY18)
As a result, GMR Infrastructure’s (GMR) Q4FY19 adjusted net loss came in at Rs1.6bn, lower than our estimated net loss of Rs2.8bn, led by higher profit from Kamalanga and Warora power plants offset by weaker margins in the mining business (PT GEMS, 30% stake). Reported losses are higher as investment in stressed assets of Rs22bn in Rajahmundry and Chhattisgarh has been written off
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%.

Key positives: Deal to sell stake in airport business to marquee investors

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

Impact on financials: Maintain our estimates for FY20E

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€‹

03/06/2019 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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