Buy GMR Airports Ltd for Target Rs 140 by Elara Capital
Scaling airports and adjacencies
Q4FY26 reflected strong operational and earnings inflection for GMR Airports (GMRAIRPO IN), led by tariff-driven aero growth at DIAL, resilient non-aero momentum and continued scale-up of duty free, cargo and adjacency businesses. While near-term traffic was hit by geopolitical and airline-related disruptions, the management expects gradual recovery from H2FY27. With Bhogapuram commissioning targeted in Q2FY27, addition of Nagpur airport, upcoming tariff revision at Hyderabad airport and ongoing monetization of commercial real estate, the company is well-positioned for the next phase of EBITDA growth and cash flow generation. Also, moderating capex intensity and improving leverage metrics are expected to support gradual deleveraging in the medium term. We largely maintain our earnings. We retain Buy with SOTP-based TP of INR 140 and introduce FY29E
Robust operational performance:
Consolidated revenue rose 37.5% YoY to INR 39.4bn, supported by revised tariffs at Delhi airport and continued growth in duty free, cargo and retail businesses. EBITDA grew 43.1% YoY to INR 14.4bn, with margin expanding to 36.7% versus 35.2% YoY, led by operating leverage and improved revenue mix. Despite an exceptional Labor Code-related provision, reported PAT was INR 3.0bn versus a loss in Q4FY25. Adjusted PAT came in at INR 3.1bn, reflecting resilient operational performance.
Non-Aero – Scale up continues:
In Q4FY26, DIAL remained the key earnings driver with revenue/EBITDA rising 27%/59% YoY to INR 19.9bn/INR 7.1bn on passenger traffic of 21.2mn (+2.7% YoY), led by revised tariffs implemented from Apr ’25, Pier-C international expansion and continued strength in duty free, retail and cargo businesses. Hyderabad airport reported revenue of INR 5.8bn (+4.2% YoY) and EBITDA of INR 3.3bn with 56% margin, aided by resilient non-aero growth, commissioning of Cargo Terminal-2 and improving commercial monetization despite softer traffic. Goa airport (Mopa) continued its ramp-up with revenue of ~INR 1.1bn and positive EBITDA of ~INR 458mn, led by a growth of 17% YoY in passenger traffic to 1.5mn. At the standalone level, GMR benefited from scaling up duty free (Delhi + Hyderabad airports), cargo and adjacency businesses, while ongoing commercial real estate developments at Delhi airport (~1.0mn sqft office, ~0.6mn sqft hotel) and Hyderabad airport (~0.8mn sqft retail) should support long-term monetization and earnings diversification.
Moderating capex; improving leverage:
GMRAIRPORT is nearing its current peak capex cycle, with net debt at ~INR 340bn in FY26. Management targets leverage <4x in the next 24 months. Bhogapuram airport (~98.7% complete) is targeted for Q2FY27 commissioning and with Nagpur, should add ~5mn passengers in FY27, supporting EBITDA growth and deleveraging.
Retain Buy with a TP of INR 140:
Valuation appears supported by improving earnings visibility, upcoming additions of airports and gradual deleveraging. We maintain earnings and value Aero EBITDA, which is a regulated fixed RoE business, on 12x, in line with utility peers. We value structural non-aero business at 35x, in line with consumer discretionary peers. We value landbank at each airport on per acre basis (incremental value of INR 17/share). We expect FY26-29E EBITDA CAGR of 17%. We reiterate Buy with TP retained at INR 140. We introduced FY29E estimate.
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SEBI Registration number is INH000000933
