Bull of the Day: Beaten down stock that rose 27% in 3 days

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Bull of the Day: Beaten down stock that rose 27% in 3 days

The infrastructure major, GMR Infrastructure rose 6.885 or 2.60 to end at Rs 40.40. It touched an intraday high of Rs 40.75 and an intraday low of Rs 37.75. There were pending buy orders of 428 shares, with no sellers available. The total traded volumes were of 1,278,886 shares. The share gained 27.24% in lat three days.

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GMR Infra BSE | NSE 30/05/12 Are Mutual Funds betting on GMR Infra? Other Stocks in this news Jaiprakash Associates | Lanco Infratech | Unitech | Jaypee Infratech | IRB Infrastructure Developers | ILandFS Transportation Networks | Era Infra Engineering | NCC | Hindustan Construction Company | GVK Power & Infrastructure |

Infrastructure major, GMR Infrastructure rose 6.885% or 2.60 to end at Rs 40.40. It touched an intraday high of Rs 40.75 and an intraday low of Rs 37.75. There were pending buy orders of 428 shares, with no sellers available. The total traded volumes were of 1,278,886 shares. The share has gained 27.24% in the last three days. On the NSE, the biggest gainer was the CNX Infrastructure Index, which gained 3.79% or 108.75 points to settle at 2976.

The stock touched its 52-week high Rs 68.70 and 52-week low Rs 29.80 on 27 Apr, 2010 and 09 Feb, 2011, respectively. Currently, it is trading -41.19% below its 52-week high and 35.57% above its 52-week low. Its market capitalisation stands at Rs 15,725.44 crore.

Q3 earnings:

The company has reported a net loss of Rs 22.2 crore for the quarter ended December 2010 as against profit of Rs 9.2 crore in same quarter the previous year. The company's net sales were up at Rs 1,358.7 crore versus Rs 1,067 crore, YoY. However, a closer look at the numbers would suggest that the company's operational performance has improved steadily in the last three quarters.

Its EBITDA was at Rs 381.2 crore versus Rs 345.4 crore, YoY. The EBITDA margin was at 28% versus 32%, YoY. Its interest cost was at Rs 294 crore versus Rs 163 crore, YoY.

What kept the stock price down?

The stock had been beaten down largely because of the commissioning of the T3 terminal at the Delhi airport, which led to higher operating expenses. When capitalised, it led to a near doubling of interest and depreciation costs hurting its EBITDA. Hence higher costs from the airport segment was a let down.

Another reason that could be attributed is the mounting debt in the company's books, which stands at over Rs 15,000 crore.

However, analysts expect that in the medium-term higher revenue from its four airports would offset higher costs and profits are likely to improve ahead. Analysts also expect good traction in its project portfolio.

What analysts say?

SP Tulsian, sptulsian.com said that, "In my view I think all the infrastructure stocks have bottomed out and you need to differentiate between them. The companies which own large assets like airports, seaports and the pure contracting plays. If any contracting or construction companies if are ruling in a PE multiple of less than 8 and if they have the order book pipeline for the next two years one should go for that obviously because this will be giving them the consistent profit, consistent growth."

He further added, "Coming on the infrastructure, companies owning large projects maybe like airports, seaports which one could put hands on, Mundra Port, GMR Infra or GVK Power , all these stocks look good, only thing that one needs a time horizon of at least 6 to 12 months on these stocks. I am not saying for the traders. Obviously the bounce back will be seen in all these stocks purely as a trader but even from investment point of view 2011 when from here on should be good for this sector."

Ambareesh Baliga, Karvy Stock Broking said that, "I would prefer a GMR or a GVK at these levels as compared to Lanco, because in fact although I am not saying that Lanco Infratech is not a good stock as such, but we in fact track GVK and GMR."

He further added, "We have been doing that for a while and we have been quite positive on that in spite of the stocks really underperforming because we feel that possibly the next 12-18 months would belong to Infra and that they are the stocks which will outperform."

Peer comparison: