Buy GVK Power & Infrastructure - Motilal Oswal

GVK POWER & INFRA 3QFY11: Power business impacts performance, cutting estimates

GVK Power & Infrastructure reported 3QFY11 consolidated net revenues of Rs4.6b (down 3% YoY), EBIDTA Rs1.3b (down 8% YoY) and PAT of Rs419m.

Reported profit is lower on account of higher interest cost on corporate borrowing raised to meet shortfall in funding equity requirement towards power.

Other income for the 3QFY11 stood at Rs34m, vs Rs109m in 3QFY10, largely owing to higher investible surplus.

We downgrade our estimates to factor in the lower operating rates for power project, no benefit from merchant sales and delays in monetisation of RE.

We now expect GVKPIL to report consol net profit of Rs1.8b in FY11E (up 11% YoY), Rs2.8b in FY12E (up 56% YoY) and Rs4.1b in FY13E (up 47% YoY).

At the CMP of Rs33, the stock trades at a PER of 29x FY11E, 19x FY12E and 13x FY13E. We arrive at a SOTP based target price of Rs47/sh, comprising of Airport (including negative contribution for Bangalore airport) at Rs18/sh, Roads at Rs7/sh, Power portfolio at Rs20/sh (post money after PE transaction) and investment in other projects, cash at Rs2/sh. Buy.

Source : Equity Bulls

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