GMR Infra shares rise 4%; Kotak initiates coverage on the stock, says it is poised for flight

Aeroports de Paris SA (ADP) would buy a 100 percent stake in GMR Infra Services Ltd and then 49 percent shareholding in GMR Airports Ltd (GAL), as per a notice submitted to the regulator.

In a report on February 24, Kotak Institutional Equities initiated coverage on the stock and said it is poised for flight.

The brokerage said it is positive on GMR Infra due to growing air travel, growing spends at airports and privatization of airports.

"Recent developments favour a sharp reduction in corporate debt and a demerger of GMR Infra’s airport business. We initiate coverage with a SoTP-based fair value of Rs 30 and expect FCF generation after FY2022," Kotak said.

Kotak expects a 12 percent FY2020E-24E EBITDA CAGR for GMR Infra on consolidated terms, driven by a 9 percent CAGR in passenger and a 4 percent CAGR in non-aero revenue per passenger.

"Airport expansion capex over FY2020-22 would defer improvement in debt metrics. We envisage FCF generation for GMRI (consolidated) beyond FY2022, which can be used to bid for new concessions," Kotak added.

However, changes in the airport monetization deal structure, lower cap on duty-free alcohol purchases and negative aero tariff at Delhi airport remain key risks for the stock, said the brokerage.

Around 12:35 hours, shares of GMR Infra traded 2.75 percent up at Rs 26.15 on BSE.

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