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Research
GMR Infrastructure - Sequential improvement in operating performance - Nirmal Bang
Posted On : 2012-08-13 21:09:33( TIMEZONE : IST )
GMR Infrastructure's (GIL) operating performance improved in 1QFY13, driven by increased tariff rates at Delhi airport. Net sales increased 24% to Rs23.1bn (12% higher than our estimate) driven by higher aero revenue at Delhi airport and also rise in EPC revenue. EBITDA increased 19.8% to Rs5.96bn, primarily driven by revised aero tariff. However, the company reported a net loss of Rs943mn (above our estimate of a loss of Rs583mn) due to higher tax provision. We believe the full benefits of revised tariff rates at Delhi airport, expected from 3QFY13, would improve its financial performance. We retain our Buy rating on the stock with a target price of Rs30 based on SOTP valuation.
Robust revenue growth: The company posted revenue growth of 24% at Rs23.1bn driven by the following: 1) Rise in airport revenue by 22.4% following revised aero tariff at Delhi airport (ramp-up in 2QFY13 and full benefits expected from 3QFY13), 2) Rise in power segment revenue by 8.6% driven by the use of regasified LNG which increased PLF (plant load factor) by 8% at Vemagiri plant, and 3) Rise in EPC revenue by 135% to Rs4.89 bn YoY.
Sequential improvement in operating performance: EBITDA increased 121.7% QoQ to Rs5.96bn and EBITDA margin improved 1,200bps QoQ to 25.8%, primarily driven by improvement in EBITDA margin at Delhi airport to 45% (which is expected to further rise to 55% in the coming quarters) and better-than-expected revenue growth in the power segment.
Reducing net losses: For the quarter, the company reported adjusted net loss of Rs940mn primarily due to sustained losses at Delhi airport following higher capitalisation charges and one-time reversal of tax assets at Vemagiri plant. Interest costs rose 29% YoY to Rs4.8bn due to increased debt. Going ahead, we expect improvement in profitability of the airport segment to turn around the company into profit.
We retain Buy rating: We believe the airport segment would continue to report improvement in financial performance led by full benefits of tariff revision from 3QFY13. Regulatory problems related to fuel availability easing, commissioning of two major power projects and beginning of toll collection at three new road projects would keep the growth momentum intact. Hence, we retain our Buy rating on the stock with a target price of Rs30.
