Hold GMR Infra; target of Rs 21: Emkay

Emkay Global Financial Services has recommended hold rating on GMR Infrastructure with a target of Rs 21 in its August 10, 2012 research report.

“GMR Infrastructure, revenues at Rs 23.1bn +24% yoy came in line with expectation. GMR reported inline numbers, albeit the growth in airport vertical was marginally lower - led by slower than expected ramp up from aero segment. Ramp up expected over coming quarters. Any lag in traffic growth will be made up under the tariff policy safeguarding DIAL’s profitability. Adj. net loss at Rs 943mn v/s exp. Rs 1.3bn led by other income at Rs1.2bn v/s exp. Rs 0.5bn. Adj. EBITDA at Rs5.97bn +19.8%yoy v/s exp Rs5.3bn. Power vertical surprised positively with Revenues at Rs Rs7.5bn v/s exp of Rs5.9bn led to EBITDA beat. AP based gas generation units received additional RLNG during summer months (May & Jun -12) which contributed to additional 8% generation during the quarter also led to the beat. Forex gain also contributed to the EBITDA out-performance by Rs 339mn.”

“Revenue at Rs10.3bn +22.4%yoy led by implementation of Tariff order from May15. Although tariff orders safeguards profitability at DIAL, however, slowing passenger growth has delayed faster ramp up in profitability. Airport passenger growth in India has shown signs of cooling off - DIAL reported a meagre 1%yoy traffic growth to 9.1mn pax, Hyderabad airport reported a flat yoy growth. Fuel continues to remain the biggest concern for power vertical. GMR is looking to taste success with the commissioning of coal based capacities starting Q3FY13E. Ramp up visible at PT GEMS is already visible with 1.77mt of coal production during Q1. EBITDA contribution also turned positive to Rs139mn. Revenue at Rs 1.05bn +5%yoy. Toll revenues at Rs 433mn +12%yoy & Annuities flat at Rs 618mn. Awaiting environmental clearance on Kishangarh-Udaipur patch (KUA)-Toll collection expected to begin from Q3FY13E.”

“Turnaround of performance in the aviation vertical was marginally slower than expected owing to a slower than expected run rate on the UDF collection in DIAL. Also clubbed with the fact that traffic growth has slowed down which is slowing the pace of ramp up. We will keenly watch out on the listing of the Singapore entity which will be expected in the coming quarters and the commissioning of coal based capacities which are expected from Oct-12. Near term macro economic gloom will limit any meaningful run up in stock."

"We maintain Hold with a TP of Rs 21. We maintain Hold as our fair value leaves little upsides. The macro economic slowdown is impacting the overall infrastructure sector and GMR being a dominant player is facing near term headwinds on the fuel and regulatory side which will continue to have a bearing on the price performance in the near term. We maintain Hold with a TP of Rs 21,” says Emkay Global Financial Services research report.

Public holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More