Maintain ‘buy’ on GMR Infrastructure with a revised sum-of-the-parts (SoTP) target price of Rs 27 per share (earlier Rs 31). Favourable policy/regulatory actions, commissioning of power assets and financial restructuring are likely to lead to improvement in GMR’s operational cash flows. In addition, asset monetisation should lend impetus to the de-leveraging exercise.
GMR’s Q2FY16 adjusted loss of Rs 440 crore was lower than our R480-crore loss estimate, due to improved power revenues and lower interest costs. Operations across assets were better owing to higher thermal PLF (aided by the gas pooling mechanism). Management plans to reduce debt by R30-40 billion by FY16 end through a combination of stake sale/equity fund raising across its various entities. With peak capex now behind, we expect the improving cash flow trajectory to continue.
Passenger (pax) and cargo continued to grow at a robust pace of 16% and 11% y-o-y, respectively, at the Delhi airport (DIAL), while at Hyderabad airport (HIAL) it was 14% and 9% y-o-y, respectively. Following commencement of gas pooling and improved PLFs at EMCO power plant, power segment EBITDA significantly improved to Rs 2.7 billion (Rs 416 million in Q2FY15 and Rs 1.1 billion in Q1FY16).
