May 12, 2011, 07.28 PM | Source: Moneycontrol.com
Motilal Oswal is bullish on GVK Power and Infrastructure and has recommended buy rating on the stock with a target of Rs 40 in its May 10, 2011 research report.
Motilal Oswal (more)
“GVK Power and Infrastructure (GVK) posted FY11 consolidated PAT of Rs 1.6 billion (against our estimate of Rs 1.7 billion). FY11 performance was impacted by: (1) negative contribution from JP-I (loss of Rs 290 million in FY11 v/s Rs 2 million PAT in FY10), (2) higher tax of 23% (45% in 4QFY11) v/s our estimate of ~14% given losses in power businesses and (3) higher minority interest given impact of ~18% dilution in GVK Energy (raised Rs 9.4 billion through PE). In 4QFY11 major projects showed impressive rebound of traffic growth. The Jaipur-Kishangarh road project traffic grew 6% YoY (v/s 2% in 3QFY11 and -1% in 1QFY11), and passenger traffic at Mumbai airport grew by 14% YoY. 4QFY11 BIAL traffic grew just 2% YoY but it grew 17% in FY11. Sustained traffic growth would be a key driver of profitability.”
“Recently, the Supreme Court quashed charging of Airport Development Fees (ADF) by MIAL. We understand MIAL filed a tariff petition with AERA about two months ago (much before the judgment) and an order is expected shortly. GVK plans to cancel notice to proceed on its proposed 1.6GW gas-based projects, due to lack of certainty about gas supply. GVK incurred Rs 2.4 billion towards the projects (including land acquisition cost) and we believe this is a step in right direction. We downgrade our estimates by ~20% for FY12 and FY13 for GVK to factor in lower operating rates for power projects and no benefit from merchant sales. We expect GVK to report consolidated net profit of Rs 1.9 billion in FY12 (up 10%) and Rs 2.3 billion in FY13 (up 19%). The stock trades at a PER of 19x FY12E and 16x FY13E. Maintain Buy for a target price of Rs 40,” says Motilal Oswal research report.
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