IDFC Securities - GMR Infrastructure (GMRINFRA) GMR Infrastructures Q3FY20 results (Outperformer) - Air traffic growth improved at the airports; deleveraging process gains momentum

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IDFC Securities

Shirish Rane

GMR Infrastructure's Q3FY20 results (Outperformer) - Air traffic growth improved at the airports; deleveraging process gains momentum

Q3FY20 result highlights

Airport traffic recovered in Q3FY20 with Delhi Airport witnessing a 7% yoy growth in passenger (vs 5% decline in H1FY20) and Hyderabad Airport reporting a 9% growth in passenger traffic (vs 4.9% in H1FY20). Note that traffic was subdued in H1 because of Jet Airways shutdown of operations.
GMR Infrastructure (GMR) revenues grew by 11% yoy to Rs16.7bn aided by strong non aero revenues growth of 12% and 138% yoy growth in rental revenues. EBITDA for airport business was Rs6.7bn, +28% yoy
Energy Business - Warora and Kamalanga PLF for Q3FY20 was 81% (vs 75% in Q3FY19) and 63% (vs 74% in Q3FY19). As a result, power assets reported EBITDA of Rs4bn (Vs Rs3.8bn in Q2FY19).
Consolidated EBITDA was Rs7.3bn, +78% up yoy. As a result, GMR Infrastructure’s (GMR) Q3FY20 adjusted net loss came in at Rs3.7bn (vs loss of Rs6.5bn in Q3FY19)
GMR has entered into an agreement to sale 100% stake in GMR Kamalanga at an enterprise value of Rs53bn (equity value of Rs14bn). Proceeds will be used to reduce corporate debt.
Earlier, GMR had entered into 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). During the quarter, GMR has agreed to sale additional 5% stake to strategic investors. Post the investment by strategic investor, GMR is likely to restructure the business into two separate verticals a) airport business b) Power and urban infrastructure business

Key positives: Improvement in passenger traffic at the airports; Sale of Kamalanga power plant

Key negatives: Delay in approval of stake sale in airports

Impact on financials: Maintain our estimates for FY20E/FY21E

Valuations & view

GMR’s has entered into an agreement to sell 49% stake in airport business and a large part of proceeds utilise the money to repay corporate debt. Further, GMR has also entered in an agreement to sell to Kamalanga power plant to JSW Energy thereby further reducing the corporate debt. After the completion of both these transactions, we expect GMR to be demerged into 2 separate companies namely Airport Company and power & urban infrastructure company, thereby further unlocking value in airports business for shareholders. Maintain Outperformer with a revised TP of Rs25.

24/02/2020 12 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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