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STOCK PERFORMANCE
1m 12m Recommendation
GMR 2.39% 40.35%
SENSEX 7.00% 9.16%
The company has performed very well although constrain on the mar-
gin, which we expect to be on track in the near future. The future
growth is expected to come from power and airports. Lower naphtha
GROWTH (%) prices and higher gas availability is further likely to benefit the compa-
ny. The biggest growth driver is going to be the airport business. The
Last Qtr. Last Yr. 4 Yr. CAGR company’s efforts to add new airlines, increase the user development
REVENUE -10.41% 75.14% 39.48% fee and other aero charges will increase revenue. The roads projects
PROFIT -82.67% 29.08% 38.46% help the company to improve their margins, as the margin from roads
projects is highest.
EPS ANALYSIS We are very positive on the long term business prospects of the com-
pany and financial performance. At Current Market Price of INR
143.05 we reiterate “BUY” on the stock with target price of INR
214.00 with a medium to long term investment horizon.
Highlights/Recent Updates
GMR Infrastructure to split its shares in the ratio of 1:2
The company has received approval from the board to spit the equity
shares of INR 2 each into two equity shares of INR 1 each. The com-
pany has planned the split to enable more small investors to buy the
stock. Even SEBI is contemplating making mandatory for companies
to split their stock price and bring it to the level of INR 1.
GMR bags Rs. 1,100 crore state highway project in Tamil Nadu
GMR Infrastructure Limited has bagged the Chennai Outer Ring Road
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project in Tamil Nadu for INR 1,100 crore. It is 8 road project and first
state highway project bagged by the company’s Highways division
since 2001.
GMR Infrastructure Seeks Acquisitions
GMR Infrastructure is looking for acquisitions in West Asia and Eu-
rope. The company has already won the contract for the expansion of
the Sabiha Gokcen airport in Istanbul, Turkey and the company had
recently bought 50 per cent stake in Intergen.
Recently we have experienced few positive signs that indicate the re-
The GDP growth has clocked an average of 9 covery of the economy. Increase in primary demand clubbed with sta-
per cent over the least three years preceding ble government has built a strong confidence in the mind of investor.
financial year ended 2009.
To fight against the global economic crisis, the Reserve Bank of India
has responded vigorously by boosting liquidity and loosening monetary
policy. The government has already announced a number of stimulus
packages that have wrecked its plans for fiscal consolidation.
The Union budget fails to meet the expecta-
tion. The stock market lost 5.83 per cent on Last month the union budget rolled out but it fails to meet the expecta-
the budget day itself, the ever-worst slump tion. The stock market lost 5.83 per cent on the budget day itself, the
on the budget day. ever-worst slump on the budget day. However, if we take a close look
on the budget, we can call it as a common man’s budget. The gov-
ernment took initiative in terms of tax relief, increase in expenditure on
public projects along with different fiscal and monetary policy. It has
been effective in arresting the fall in the GDP growth rate as compare
to last year.
COMPANY OVERVIEW
URBAN INFRA
Aerotropolis Development
Monetized 2.69 million sq. ft. commercial
land at Delhi; balance ~30 million sq. ft.
available
305 room airport hotel at Hyderabad
1,000 acres at Hyderabad
Plan to develop 3,300 acres of multi-product
SEZ
Urban Infrastructure
Energy sector reforms have evolved over The company has also setup an urban infrastructure division which in
time and created an environment for private primarily into Special Economic Zones (SEZs) and property develop-
players to capture significant value from the ment around company infrastructure assets. The current focus of
huge demand for power in India. property development is to develop an aerotropolis around the Delhi
and Hyderabad International Airports.
Historically, the responsibility for genera-
tion, transmission and distribution of power International Business
in India rested only on the central and state The company has set up International division to serve Energy and
governments. Power generation capacity Airport sectors. The company has opened two regional offices in Tur-
grew at about 4.4 per cent per annum over key and Singapore. The company has a 40 per cent stake for the con-
the last ten years, and failed to keep up with struction of Sabiha Gokcen International Airport. Even the company
the demand growth, leading to a situation of has acquired a 50 per cent stake in InterGen, a leading global power
persistent power outages. generation company. InterGen N.V., has 7700 MW of gross operating
capacity across five countries and an additional 2800 MW capacity
To give a boost to power generation, the under development. The company also acquired 100 per cent owner-
Indian government introduced the first wave ship stake in Island Power Singapore - a gas based 800 MW private
of reforms in the power sector in 1991. Sev- power utility.
eral steps were taken to attract private sec-
tor investments, like assuring attractive re-
turns on investments,
The GDP growth has clocked an average of 9 per cent over the least
three years preceding financial year 2009. For India to achieve the
same level of growth, the spending in infrastructure need to be in-
creased to 9.5 per cent of the GDP by the 2011-2012, from the current
level of around 6 per cent.
Some of the projects planned for the next five years include:
40,000-MW hydro power generation capacity during the 12th (2012-
17) and 13th (2017-22) Plans
Additional power generation capacity of about 70,000 MW
Constructing Dedicated Freight Corridors between Mumbai-Delhi and
Ludhiana-Kolkata
Capacity addition of 485 million MT in Major Ports, 345 million MT in
Minor Ports
Modernisation and redevelopment of 21 railway stations
Developing 16 million hectares through major, medium and minor irri-
gation works
Modernisation and redevelopment of 4 metro and 35 non-metro air-
ports
Six-laning 6,500 km of Golden Quadrilateral and selected National
Highways
Constructing 1,65,244 km of new rural roads, and renewing and up-
grading existing 1,92,464 km covering 78,304 rural habitations
PEST ANALYSIS
PEST analysis of any industry investigates the important factors
PEST Analysis that affect the industry and influence the companies operating
in the sector. PEST stands for Political, Economic, Social and
Technological analysis. The PEST Analysis is a tool to analyze
the forces that drive the industry and how those factors can in-
fluence the industry.
Political Factors
Budget allocation
Budget allocation Through Infrastructure Investment Finance Company Ltd (IIFCL), the
government has planned to put together a corpus of over $ 8.15 billion
for infrastructure project. IIFCL will provide $ 1.2 billion for infrastruc-
ture projects during 2009-10, which is nearly double the amount dis-
bursed by it during 2008-09.
Economic Factors
Growing Economy
Growing Economy Indian economy has registered a growth of more that 9 per cent for
last three year preceding the financial year 2009. The government
major concern is to fight against the slowdown of the economy growth
rate, and has accepted to increase the spending in infrastructure to
climb up the growth of 9 per cent.
Power production
Now a days, just food, clothes and shelter is not the basis needs but
Power production education, power and infrastructure has also became a part of basis
need. In India, still most of the rural areas don’t have power supply.
The different yojna sponsored by the government is to increase the
production of power which will leads to overall enhancement of stan-
dard of living. Huge Capacity additions have been planned in power
th
generation in 11 Five Year Plan to the tune of 79 GW as against 135
GW currently installed. The total investment opportunity is around $
150 billion over a 5 year horizon.
Social Factors
Reliability Factor Reliability Factor
For any infrastructure company, reliability is utmost important because
infrastructure assets are used by vast community. Safety is the key as
infra are meant for public.
Advance Technology
Technological Factors
Advance Technology
Technology advancement has changed the face of almost all industry.
Infrastructure is also among the list. The quality, timeliness and cost
are the most important advancement due to technology.
SWOT ANALYSIS
Strengths
Balanced diversification in different segment
The company has diversified their services to different sector. The
Balanced diversification in different segment company has balanced revenue which provides the company a safety
of margin against any uncertainty to specific industry risk.
Strong management
Strong management The company management team consists of strong experienced team
backed by strong Global Partnership.
Weaknesses
Financial Leverage
The company debt to equity ratio has increased in the current year.
Financial Leverage The further requirement of cash could leads to high debt, which will
ultimately result, into high borrowing cost.
Opportunities
Airport Development Fees
The government has allowed to charge an Airport Development Fee
Airport Development Fees
(ADF) of INR 200 per domestic passenger and INR 1,300 per interna-
tional passenger for next three years departing from the Delhi Airport.
Threats
Issue with the carrier owner and the government
The private carrier owner, whose market share is around 70 per cent,
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called off the strike, for a discussion, which was been decided for 28
Issue with the carrier owner and the gov- August 2009. The private players are facing problems in operating due
ernment to low margin. If any further strike happens, it will have a direct impact
on the company revenue.
FINANCIALS
The company has registered a continuous
and significant growth in both top line and in Income Statement - Annual
bottom line. The top line has grown over 75 The company has registered a robust growth rate over the past few
per cent in the last year. years. The company has recently reported net revenue of INR 4019.22
crore that has registered a growth of more than 75 per cent over the
last year, which stands at INR 2294.78 crore.
The company has registered a decline in the margins as compare to
the last year, which was mainly because of higher input cost. The
company will be able to maintain it margin as the input cost has ease.
FINANCIALS
The corpus cash of around 2500 crore will
be utilized by the company as it has many Balance Sheet
projects in line.
Cash Flow
SHARE HOLDING
Out of 74.91 per cent, 10.05 per cent has been pledge by the promo-
ters of the company.
Power Business
Growth is expected to come from after financial year 2011 due to an
additional 5,000 MW capacity at eight different locations in India. Low-
Power Business er naphtha prices and higher gas availability is further likely to benefit
the company.
Airport Business
The biggest growth driver is going to be the airport business. Hydera-
bad airport is already operational. The company’s efforts to add new
Airport Business airlines, increase the user development fee and other aero charges will
increase revenue. Full development of the Delhi airport will give a
boost to the airports business in the long term. The company is target-
ing to complete all its remaining road projects by this year-end.
OUTLOOK
The company has performed very well although constrain on the mar-
gin, which we expect to be on track in the near future. The future
growth is expected to come from an additional 5,000 MW capacity at
eight different locations in India. Lower naphtha prices and higher gas
availability is further likely to benefit the company. The biggest growth
The influx in the number of passengers due driver is going to be the airport business. Hyderabad airport is already
to the Commonwealth Games in 2010 will operational. The company’s efforts to add new airlines, increase the
helps to drive traffic growth and will also user development fee and other aero charges will increase revenue.
lead the company to resister a huge growth Full development of the Delhi airport will give a boost to the airports
in the revenue. business in the long term.
The roads projects help the company to improve their margins, as the
margin from roads projects stand at mote than 70 per cent. The com-
pany has a target to complete all its remaining road projects by this
year-end.
We are very positive on the long term business prospects of the com-
pany and financial performance. We expect the company to register
around 60 per cent growth in airport revenue for the next financial
year.
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