Add GMR Infrastructure Ltd For Target Rs.56 - ICICI Securities
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India flying high again
Traffic at the GMR-managed Delhi and Hyderabad airports grew 18% and 24% YoY in Q1FY24. International traffic too grew sharply at the two airports – by 20%. Notably, traffic was up 14% and 12% compared to pre-covid levels. Thus, their aero and non-aero revenues grew sharply during the quarter. As a result, EBITDA surged 76% YoY. Also, GMR received a favourable order from appellate court for Delhi Airport. The order, if approved by the court, will likely lead to significant value creation. GMR is set to benefit from growth in traffic, higher international pax and asset monetisation at the airport. With Groupe ADP taking a majority share in listed entities, we expect accelerated value creation over the medium term. Maintain ADD with a revised target price of INR 56 per share.
‘India is flying’
Delhi Airport reported traffic of 18.1mn pax – up 18% YoY. Domestic traffic grew 13% to 13.7mn pax while international traffic grew 38% YoY to 4.4mn pax. Hyderabad Airport reported traffic of 6.2mn pax – up 24% YoY. Note that domestic traffic for India grew 25% YoY in Jul’23.
Sharp rise in operating profit
Overall, revenue grew 43% YoY to INR 20bn and EBITDA 76% YoY to INR 7.5bn. Company reported an adjusted loss of INR 1bn. During the quarter, it booked gains of INR 760mn on sale of assets. As a result, it reported a loss of INR 297mn (vs loss of INR 1.3bn). Delhi and Hyderabad airports reported EBITDA of INR 3.5bn and INR 2.8bn respectively.
New order on Delhi Airport – will likely lead to significant value
Delhi Airport moved court challenging the interpretation of the concession agreement signed in 2006 by the regulator. In Q1FY24, the appellate court ruled in favour of Delhi Airports, which we believe could lead to substantial value creation for shareholder (details inside).
View and valuation
We believe GMR Airports could create significant value for shareholders in the medium term given that: 1) traffic in airports is back, 2) its own corporate structure has been simplified, and 3) new terminals are being commissioned. Maintain ADD with a target price of INR 56.
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