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Equity Research Report On


GMR Infrastructure Limited

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GMR Infrastructure Limited st


31 August 2009 BUY
st
Market Cap: Price as of 31 August: 52 Week Range: Beta: Industry: Target Price:
26,046.69 Crore 143.05 183.50 /45.60 1.03 Infrastructure 214.00
Outstanding Shares: Book Value Per Share: Face Value Per Share: BSE Code: NSE Code: Upside:
182.06 Crore 31.30 2.00 532754 GMRINFRA 71.00

GMR INFRA BUSINESS DESCRIPTION

GMR Infrastructure Limited is one of the leading


infrastructure conglomerates in India having
proven track record in the development and oper-
ation of power plants, road projects, and world-
class airports at Delhi, Hyderabad and Istanbul. It
offers business operations through its subsidiar-
ies in various sectors i.e. airports, energy, high-
ways and urban infrastructure and others.

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
th
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.

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Indian Economy: An Overview

Indian Economy is among one of the fastest growing economy in the


World. The GDP growth has clocked an average of 9 per cent over the
Indian Economy is among one of the fastest least three years preceding financial year ended 2009. U.S. sub-prime
growing economy in the World. was the main reason for the downward movement in the economic
growth in the recent time.

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.

In the budget, the government has planned a spending of around $


200 billion for the current financial year. It is a massive amount of
The government took initiative in terms of spending for the current financial year and the government official ex-
tax relief, increase in expenditure on public pected the fiscal deficit to be 5.5 per cent for the current year. Howev-
projects along with different fiscal and mon- er, we feel the fiscal deficit to be higher than the expected by the gov-
etary policy. It has been effective in arresting ernment.
the fall in the GDP growth rate as compare to
last year. Nevertheless, the government took several steps to fight against the
slowdown. The government has increased the spending in the infra-
structure, both direct and indirect, through refinancing options offered
by India Infrastructure Finance Company Limited (IIFCL). It will leads
to growth for Infrastructure Companies. The government also took
steps to enhance the final consumption by the means of marginal in-
crease in certain tax exemption threshold and removal of surcharge on
The RBI has lowered the repurchase (repo) personal income tax. Even the government has offered tax breaks in
rate six times since October 2008, by a cu- oil and gas sector, support to financial institutions, etc.
mulative 425 basis points, from 9 per cent to
4.75 per cent. The RBI has lowered the repurchase (repo) rate six times since Octo-
ber 2008, by a cumulative 425 basis points, from 9 per cent to 4.75 per
cent. We expect further cut in the repo rate by around 50 basis points,
to 4.25 per cent, in the next few months. The rapid fall in wholesale
We expect further cut in the repo rate by price inflation (WPI) over the past three quarter has given the RBI the
around 50 basis points, to 4.25 per cent, in flexibility to cut interest rates. At the same time, RBI will remain cau-
the next few months. tious about monetary easing, since the fall in bond yields that has oc-
curred over last few months indicates that there is more liquidity in the
system.

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Infrastructure Industry - Leading to the ultimate growth of


the Economy
Infrastructure Industry - An essential part of Infrastructure Industry is an essential part of any economy. The sim-
any economy. plest meaning of infrastructure says that anything that forms the core
of the functioning of any country is infrastructure. Infrastructure assets
are the physical structures, facilities, and networks that provide essen-
tial services to the public. These assets include transportation struc-
tures (roads, bridges, tunnels, railways, airports) energy & utility com-
Anything that forms the core of the function- panies, communication entities and social services such as education-
ing of any country is infrastructure. al facilities and hospitals. While some of these assets are owned by
the private sector, government entities own the majority of these facili-
ties.
Infrastructure assets are India’s GDP has registered an average growth rate of 9 per cent over
physical structures the last three years proceeding the financial year 2009. For India to
facilities maintain the same growth rate in the future, infrastructure alone has to
and networks register a growth of more than 9 per cent as compare the ~6 per cent
that provide essential services to the public. in the last year. There is a direct strong correlation between the infra-
structure growth and GDP of the country.
Assets include India is among one of the fastest growing economy in the world. The
transportation structures (roads, bridges, demand for infrastructure is certainly very big. And in order to sustain
tunnels, railways, airports) a high growth rate in economic development, there should be a conti-
energy nuous investment in infrastructure. Even the new government has
utility companies underlined its commitment to promote growth in Infrastructure.
communication entities
social services (educational facilities and Further, regions within India differ in terms of infrastructure availability
hospitals) and this gap can potentially widen, depending upon state-specific eco-
nomic and policy environment. A recent release state that most of the
industries are running at around 90 per cent of the capacity utilization
levels, leaving little room for further increase in production levels with-
out further fresh investment for capacity addition. Hence, there is an
urgent need to expand the capacity so that it may not act as a bottle
neck to further economy growth.

The government is targeting an investment of around $ 20 billion over


the next two years in the infrastructure sector. The scheme aims to
take up infrastructure projects under public-private partnership (PPP)
with minimal private investment. The government has asked the Infra-
structure Investment Finance Company Limited (IIFCL) to put together
a corpus of over $ 8 billion for this purpose.

IIFCL plans to provide $ 1.2 billion for infrastructure projects during


2009-10, which is nearly double the amount disbursed by it during
2008-09. This is in addition to the $ 320 billion that the government
plans to invest for the upgradation of ports, railroads, highways and
airports over the next 15 years.

The planning commission has estimated an investment of $ 500 billion


th
during the 11 Five-year plan period (2007-2012) for the addition in
infrastructure for the enhancement of roads, highways, ports, airports,
etc.

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COMPANY OVERVIEW

GMR INFRA - THE POWER OF DIVERSIFICATION

GMR Infrastructure Limited is one of the leading infrastructure con-


glomerates in India having proven track record in the development and
operation of power plants, road projects, and world-class airports at
Delhi, Hyderabad and Istanbul.

The company, formerly known GMR Vasavi Infrastructure Finance


Limited, was incorporated in 1996 and is headquartered in Bangalore,
India. GMR Infrastructure Limited is a holding company, which con-
ducts all its business operations through its subsidiaries in various
sectors i.e. airports, energy, highways and urban infrastructure and
others.

The company involves in power generation business, as well as de-


velops airport infrastructure facilities; including the Green field Interna-
HIGHLIGHTS tional Airport at Hyderabad, as well as the modernization of Delhi Air-
port, through a joint venture with Airport Authority of India. It also de-
AIRPORT velops expressways and urban infrastructure of special economic
Delhi and Hyderabad zones. Further, the company is also engaged in agri-business with
Operates two of India’s largest airports - 27 sugar as its main product line. The company has its operations in the
per cent traffic share (29 million PAX) various regions across India, which include Andhra Pradesh, Orissa,
Current capacity of 38 million PAX, increas- Punjab, Karnataka and Tamil Nadu; the UK; Spain; and Turkey. In
ing to 72 million PAX by 2010 addition, the company offers carbon ferro chrome, extra low phos-
Aerospace & cargo SEZs at Hyderabad with phorous ferro chrome.
500 acres development potential
The company recorded revenues of INR 4,019.22 crore in the fiscal
ENERGY year ended March 2009, an increase of more than 75 per cent over
Power generation 2008. The company's operating profit was INR 687.61 crore in fiscal
3 operational projects (823 MW) 2009, an increase of around 48 per cent over 2008. Its net profit was
Financial closure of additional 1,050 MW INR 259.38 crore in fiscal year 2009, an increase of around 29 per
8 projects under development 4,180 MW cent over 2008.
Diversified fuel mix of gas, coal and hydro
Power and Airport provide the major revenue to the company. Hydera-
HIGHWAYS bad and Delhi airports together account for about 27 per cent of airline
4 annuity and 4 toll roads passenger traffic. Roads construction provides a very little revenue but
5 roads operational it contributes the highest in terms of margin.
Construction of 1 toll road completed in May
2 Road projects under construction
Annuity 285 kms
Toll 347 kms

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

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There is a huge untapped potential, which BUSINESS SEGMENT


can lead tremendous growth in the aviation
sector. The key drivers for growth of the sec- Airports sector
tor are: GMR Infrastructure ventured into airport development at the time when
Robust growth of the economy the Government invited bids for constructing a world class Greenfield
Expansion in network of low-cost airlines airport at Hyderabad in a Public-Private partnership model. Later, the
India emerging as a global hub for manufac- company was awarded the contract to modernize, restructure, operate
turing as well as services and manage the Delhi airport, one of India’s busiest international air-
India emerging as a popular international ports.
tourist destination
Large number of people of Indian origin re- Energy sector
siding abroad The company is a prominent contributor to the Indian power sector
through various projects across various fuel types (hydro, thermal and
The Indian civil aviation sector has regis- natural gas). It capitalized on the private investment policy of the Gov-
tered robust growth in passenger and freight ernment in constructing, developing and managing power plants. It has
traffic in the past few years. The entry of no- established three operational power plants and is currently developing
frills (low cost) airlines has leads to increase eight power projects.
in demand. The changes in living standard
and life style have also added further de- Coal Assets
mand. To secure fuel supply for energy business, the company has acquired
100 per cent stake in a coal mine, PT BSL, Indonesia having mine life
We have seen a double-digit growth in pas- of approximately 25 years. The company has also acquired 33.34 per
senger as well as freight traffic over the last cent stake in Homeland Energy Group (HEG).
few years except the financial year 2009. The
recent slowdown of the economy has an Highway
impact in the number of passenger as the It is a leading developer and operator of highways business in India
corporate curtails there extra expenditure on and holds concessions for six highway projects measuring a total
conveyance. However, the economy has length of around 421 km. The Group has recently won two road
recovered and the forthcoming Common- projects, the 181 km Hyderabad - Vijayawada project in Andhra Pra-
wealth Games in 2010 will helps to drive traf- desh on toll basis and 29 km Chennai Outer Ring Road state project in
fic growth again. Tamil Nadu on annuity basis.

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,

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Why Infrastructure & Energy…???

Infrastructure is clearly the central theme of today’s growing environ-


ment. The recent slowdown of the overall Indian economy seems to
back again on growth track. For any economy, Infrastructure always
Infrastructure - A central theme of today’s plays an important role not just for the growth of the particular industry
growing environment. but also for other industries.

Even the new Government as underline their commitment for the


growth in the Infrastructure industry.

Infrastructure growth is a key for achieving a long term economic


Government as underline their commitment growth rate. Infrastructure can be defined as a unique risk and return
for the growth in the Infrastructure industry characteristic which has more of stable cash flow and relatively lesser
dependence on economic cycles as compared to other sector. In fact,
infrastructure helps to fight and to curb against the slow down in the
economy.

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.

According to a recent release, the government across the world has


realized the need for the hike in the infrastructure spending as a mean
for economic growth. A massive amount of around $ 500 billion of in-
vestment is proposed for the eleventh plan period (2007-12). About 30
The projected sector wise shares stand as per cent of the total investment is expected to come from the private
30.40 per cent in electricity sector (including public-private partnership). The government has
15.40 per cent in roads and bridges enacted many proactive measures like opening up a number of infra-
13.70 percent in telecommunications structure sectors to private players, permitting FDI into various sectors,
12.40 per cent in railways introducing model concession agreements, taking up new projects like
28.10 per cent among others the National Highway Development Project, National Maritime Devel-
opment Programme among others.

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

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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.

Public-Private Partnership Public-Private Partnership


The government has planned for 30 per cent of the total investment in
th
the 11 Five-year plan to be invested through the private players. It
provides an opportunity to corporate.

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.

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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.

Excellent Track Record


Excellent Track Record The company has an excellent and continuous track record for execut-
ing the project before the scheduled deadline.

Strong Competencies across all Stages of the Project Life Cycle


Strong Competencies across all Stages of The company has a strong knowledge and competencies across all
the Project Life Cycle stages of the Project Life Cycle, which helps to company to get differ-
ent projects.

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,
th
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.

Investment Concerns - Huge requirement of funds and failure to se-


cure could dampen the revenues
The company has a huge capital requirement for different project. At
Investment Concerns
the same time, as these projects are highly levered, debt at higher
interest rates will lead to subdued in the company margins.

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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.

Income Statement - Quarterly


The company has reported a decline net The company has registered a decline of ~10 per cent in top line as
profit that was mainly due to high deprecia- compare to last quarter but a growth of ~34 per cent as compare to
tion and interest expense. June quarter last year. The overall quarterly performance was on a
lower side. Although the GP margin was in line but NP margin was
very less. Higher depreciation and interest expense has resulted in
poor margin.
As the interest rate has given a relief, the company is expected to
meet to margin in the next quarter.

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FINANCIALS
The corpus cash of around 2500 crore will
be utilized by the company as it has many Balance Sheet
projects in line.

Recently, the company has invested a huge


amount in the Property, Plant and equip-
ment. Even the depreciation for the current
year ended has surge a lot.

The company, due to requirement of cash,


has issued Long-Term Debt to meet to cash
requirement.

Cash Flow

The company has continuously reported


positive cash from operations, although for
last FY the cash from operation was quit low
mainly due to rise in Accounts receivable
and decrease in accounts payable.

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SHARE HOLDING

Share Holding Pattern for the last 3 years

GMR Infrastructure Limited has informed


BSE that 10.05 per cent of total share of the
company has been pledge.
Graphical presentation of Share Holding Pattern

Total promoter holding stands at around 75


per cent of the total outstanding share of the
company.

Pledged-O-Meter (Encumbered Shares)


The promoter has pledge around 13.51 per
cent of total shareholding of promoter and Total promoter holding stands at 74.91 per cent of the total outstand-
promoter group. ing share of the company.

Out of 74.91 per cent, 10.05 per cent has been pledge by the promo-
ters of the company.

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KEY TAKEAWAYS FOR THE INVESTOR - ROAD AHEAD

Advantage India - Foreign Direct Investment (FDI)


Advantage India - Foreign Direct Investment 100 per cent FDI is allowed in all segments of power sector including
trading

Impact of Union Budget


Infrastructure Investment Finance Company Limited (IIFCL) will refin-
Impact of Union Budget ance 60 per cent of commercial banks loans for PPP projects with INR
1 lakh crore investments over the next 15-18 months.
NHAI allocation has been increased to INR 1.42 lakh crore.
Both of the above steps has a positive impact on the company perfor-
mance.

Fiscal incentive Fiscal incentive


Zero customs duty on import of capital goods for Mega Power Projects
Income tax holiday for generating plants for 10 years

Section 80-IA benefit extended till March 2011


Union Budget 2009 has proposed extension of Sec 80-IA benefit to
Section 80-IA benefit extended till March Power utilities (generation, transmission and distribution) by one more
2011 year. The benefit was hitherto available for the projects commissioning
before March 2010, extended now to March 2011. The extension of
the benefit has a positive impact on the company.

Leading Indian Infrastructure Player: Leading Indian Infrastructure Player:


Over INR 500 billion Investments planned over next five years
PPP model to play significant role in the Infrastructure sector

Broad Based Infrastructure player & strong track record


Significant presence across high growth sectors like Airports, Power
Broad Based Infrastructure player & strong and Roads
track record Initiative to diversifying into new business segments
Extensive experience of Developing and Executing projects
Established a Reputation of Reliability and Timely Project completion

Significant Growth Opportunities


Significant Growth Opportunities Plans to tap into new opportunities in India and Abroad in the infra-
structure space

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.

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KEY TAKEAWAYS FOR THE INVESTOR - ROAD AHEAD

OUTLOOK

GMR Infrastructure Limited is one of the leading infrastructure con-


The company is able to generate positive glomerates in India having proven track record in the development and
Cash Flow from Operation. operation of power plants, road projects, and world-class airports at
Delhi, Hyderabad and Istanbul.

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.

According to DCF valuation methodology, the price of the stock is un-


dervalued at current level of INR 143.05. We reiterate “BUY” on the
stock with target price of INR 214.00 with a medium to long term in-
vestment horizon. The Upside for the stock is INR 71.00.

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HEM SECURITIES LIMITED


MEMBER-BSE,CDSL

MUMBAI OFFICE: 14/15, KHATAU BLDG., IST FLOOR, 40, BANK STREET, FORT, MUMBAI-400001
PHONE- 0091 22 2267 1000 FAX- 0091 22 2262 5991

JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001

PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757

GROUP COMPANIES

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HEM FINANCIAL SERVICES LIMITED
SEBI REGISTERED CATEGORY I MERCHANT BANKER

Disclaimer: This document is prepared on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on
this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended as an offer or solicitation
for the purchase or sell of any financial instrument. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited and any of its employees
shall not be responsible for the content. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this
material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned here in and the same have acted upon or used
the information prior to, or immediately following the publication

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