GMR Infrastructure (GMRINF) 34

Transcription

1 Result Update Rating matrix Rating : Buy Target : 38 Target Period : 12 months Potential Upside : 13% What s changed? Target Changed from 18 to 38 EPS FY15E Changed from to EPS FY16E Introduced at Rating Changed from Sell to Buy Quarterly performance Q4FY14 Q4FY13 YoY (%) Q3FY14 QoQ (%) Revenue 2, , , EBITDA (10.7) EBITDA (%) bps bps PAT (578.3) (202.6) (520.2) 11.2 Key financials Crore FY13 FY14 FY15E FY16E Net Sales 8, , , ,002.3 EBITDA 2, , , ,385.8 Adj. Net Profit (689.3) (1,810.2) (1,002.7) (626.4) EPS ( ) (1.8) (4.7) (2.6) (1.6) Valuation summary FY13 FY14 FY15E FY16E P/E NA NA NA NA Target P/E NA NA NA NA EV / EBITDA P/BV RoNW (%) (7) (24) (15) (10) RoCE (%) Stock data Particular Amount Market Capitalization crore Total Debt crore Cash 3321 crore EV crore 52 week H/L 38/11 Equity capital 389 crore Face value 1 Price performance 1M 1M 1M 1M GMR Infra GVK Power JP Associates Analyst Deepak Purswani, CFA deepak,purswani@icicisecurities.com Bhupendra Tiwary bhupendra.tiwary@icicisecurities.com Nikunj Gala nikunj.gala@icicisecurities.com Energy overhang subsides June 3, 2014 GMR Infrastructure (GMRINF) 34 In Q4FY14, GMR Infrastructure (GMR) reported a net profit of crore primarily due to crore - profit on sale of Turkey airport, 14.7 crore - profit on sale of road asset and 63.5 crore - profit on sale of coal assets GMR s adjusted net losses stood at crore vs. our expectation of crore primarily due to higher interest and depreciation expenses GMR is also mulling an option to monetise DIAL s 20 acre in FY15E in the similar structure of FY10 where it received higher upfront and infrastructure deposit Walking on asset light asset right strategy; debt at peak level As a part of its asset right asset light strategy, GMR has focused on monetisation of its assets. Since January, 2013, GMR has undertaken monetisation worth ~ 11,000 crore through sale of stake in various assets like Singapore power project (equity: 2640 crore and debt: 3750 crore), Jadcherla (equity: 206 crore & debt: 310 crore), Ulundurpet projects (equity: 222 crore & debt: 580 crore), & Turkey airport (equity: 1740 crore & debt: 1412 crore). This enabled it to largely maintain its net debt to equity at 3.5x ( 37,788 crore) in FY14 despite it being in capex mode. Furthermore, with no more major capex lined up (except Chhattisgarh project) and with its plans to monetise 20 acre in DIAL Real Estate, going ahead, we believe GMR net debt has peaked out. Restructured GMR Energy CCCPs key overhang goes away To fund its equity in power and airport acquisition, GMR had raised 1395 crore at pre-agreed IRRs in In February 2014, GMR managed to re-negotiate terms with investors for GMR Energy CCPS, value of which was ~ 2300 crore. As per revised terms, existing investors agreed to swap investment worth 1,136 crore (50% of CCPS value) in GMR Infra after 18 months at prevailing market. The remaining 50% of CCPS will get converted into GMR Energy at pre-determined valuation of ~ 6,000 crore (much higher than our valuation). While the conversion of CCCPS in GMR Infrastructure at current prices would lead to dilution of ~8% (factored in our valuation now), this has partially addressed the overhang for the stock as GMR Energy is much higher than our valuation and there is no more guaranteed return in the deal. Stabilisation of new power projects to reduce GMR s losses In FY14, GMR s losses in the power division expanded further from crore in FY13 to ~ 1250 crore in FY14 due to non-availability of natural gas and commissioning of new capacities. We anticipate GMR s losses in the power division will come down to 637 crore in FY16E with stabilisation of the new capacities. Consequently, we expect GMR s losses to come down from 1810 crore in FY14 to 626 crore in FY16E. Energy overhangs subsides; upgrade to BUY With the peaking of the debt level, passing away of key overhang such as restructuring of PE in GMR Energy, and narrowing of losses, we upgrade the stock to BUY with an SOTP based target price of 38/share. We now value the airport business (including real estate) at 26.5/share, power at 10/share and other business at 6.5/share. We also highlight that our valuation incorporates conversion of GMR Infrastructure CCPS leading to ~9% dilution at the current market price. ICICI Securities Ltd Retail Equity Research

2 Variance analysis Year Q4FY14 Q4FY14E Q4FY13 YoY (%) Q3FY14 QoQ(%) Comments Net Sales 2, , , , Topline largely in line Other Income Consumption of fuel Employee cost Generation & Op. Exp Purchase of traded goods Other Expenditure EBITDA EBITDA Margin (%) bps bps Depreciation Interest PBT NA NA Taxes NA 58.1 NA Adj PAT NA NA Exceptional Item 1, NA 79.2 NA Relates mainly to profit on sale of Istanbul Airport Reported PAT 1, NA Change in estimates FY15E FY16E ( Crore) Old New % Change Old New % Change Revenue 13, , NA 15,002.3 NA EBITDA 5, , NA 7,385.8 NA EBITDA Margin (%) bps NA 49.2 NA PAT , NA NA EPS ( ) NA -1.6 NA Assumptions Current Earlier FY13 FY14 FY15E FY16E FY15E FY16E GMR Energy NA GMR Power NA Vemagiri NA Kamalanga NA Alaknanda NA Chhattisgarh NA EMCO NA ICICI Securities Ltd Retail Equity Research Page 2

3 Company Analysis Power division Kamalanga, EMCO losses add to gas pain GMR s power division continued to be hit badly on account of no gas availability at Vemagiri and GMR Energy (both had zero output) and lower offtake at liquid fired Chennai due to strong hydro projects output. This newly commissioned plant at Kamalanga and EMCO, which are in stabilisation phase added to the bottomline pain given the interest and depreciation cost. Consequently, the power division posted a loss of crore Going ahead, the power division is expected to be bolstered by full operation of new plants such as EMCO and Kamalanga. Hence, we anticipate that GMR s losses in the power division will come down to 637 crore in FY16E with the stabilisation of new capacities Exhibit 1: Power Project Status Project (Capacity MW) Project Completion Expected CoD Particulars Warora (EMCO) Maharashtra (600 MW) 100% Unit I of 300 MW commissioned in March 13, 2nd unit declared FSA signed for entire capacity of 600 MW. COD on Sept, 2013 PPA signed with TNEB for 150 MW Kamalanga Orissa (1,050 MW) 96% Unit I of 350 MW commissioned in April 2013; Unit II 350 MW comissioned in Nov-13 and Unit III 350 MW- comissioned in Mar-14 Firm linkage for 500 MW & tapering linkage for 550 MW -Allotted Rampia mine (to be developed) in JV with others; can also source via e- auction / import Rajahmundry (PG III) AP (768 MW) - Based on gas availability High on the gas allocation list from KG Basin Chhattisgarh (PC III) Raipur (1,370 MW) 89% Unit I - FY14; Unit II - FY MW to CSPTRADCO (Chhattisgarh) Recommended for coal linkage by CEA Bajoli Holi (180 MW) - Hydro Himachal Pradesh 1% FY17 Achieved Financial Closure; DPR approved by CEA; Environmental Clearance obtained; CDM: PDD under preparation ICICI Securities Ltd Retail Equity Research Page 3

4 Airports division profit from SGIA sale booked The passenger growth was a handsome 15.8% and 9.5% YoY at both DIAL and GHIAL respectively while for SGIA it was at ~28.6% YoY. During Q4FY14, passenger growth was muted at 2.1% and 2.3% YoY at both DIAL and GHIAL, respectively. In terms of cargo, it was 14.8% & 5.9% YoY for DIAL & GHIAL, respectively, during the quarter. For FY14, passenger and cargo grew 7.4% and 10.9%, YoY, respectively, for DIAL. At GHIAL, passenger and cargo growth stood at 4.2% and 7.4%, respectively In terms of financial performance, the airport segment reported a topline of crore during Q4FY14 (decline of 8.4% YoY) as the company has disposed off SGIA (Istanbul Airport). On the bottomline front, it reported a PAT of crore as it included profit of crore on sale of the Istanbul airport booked in the airport segment while remaining crore was booked in the others segment. For FY14, the airport segment reported a PAT of aided mainly by the profit on sale of Istanbul airport AERA has issued the tariff order in February 2014 based on single till methodology. However, GHIAL has filed a writ petition in AP Court challenging the single till methodology adopted by the airport regulator, It has issued directions to the MoCA for not giving policy direction to AERA on till approach to be followed in case of GHIAL and discriminating GHIAL as compared with Bangalore International Airport Ltd (BIAL), which is a similar greenfield PPP where MoCA has advised AERA to follow the hybrid till approach The Department of Transportation and Communications (DOTC), Republic of the Philippines formally awarded the Mactan-Cebu International Airport rehabilitation, expansion and operation project to the GMR-Megawide consortium for a 25-year concession period. GMR would hold 40% stake in the project. The consortium need to pay upfront fees of $326 million and will invest construction capex of $375 million (debt-equity of 70:30) in the next couple of years to construct a new terminal and upgrade the older terminal at the airport. At present, annual revenues from Mactan-Cebu International Airport stand at ~$35 million, which is set to increase post further upgradation and new terminal. They also plan to enhance the non-aeronautical revenue from the airport, which is currently almost nil, by developing an 8 acre land parcel for commercial purpose. GMR expect non-aeronautical revenue to grow at 25-30% CAGR The board has approved real estate monetisation of 20 acres of land at DIAL. GMR is expecting it to complete it in the next two years Going ahead, we anticipate the airport division revenues will decline to 3749 crore in FY16 from crore as we believe with the AERA order expected in the next three to six months aero revenues are expected to see a decline as this regulatory period FY15-19 will not have losses, which were adjusted in the last regulatory period, FY09-14, leading to a sharp hike in tariff of ~350% Exhibit 2: Airport division performance crore Q4FY14 Q4FY13 Q3FY14 YoY(%) Q0Q(%) Net Revenue 1, , , EBITDA Margin (%) PAT 1, NM NM Margin (%) ICICI Securities Ltd Retail Equity Research Page 4

5 Exhibit 3: Airport operational performance GHIAL DIAL crore Q4FY14 Q4FY13 Q3FY14 YoY(%) Q0Q(%) FY14 FY13 YoY (%) Q4FY14 Q4FY13 Q3FY14 YoY(%) Q0Q(%) FY14 FY13 YoY (%) Net Sales EBITDA , , PAT (post MI) Rev/PAX ( ) Passengers (mn) Domestic International Total Cargo ( 000 tns) Domestic International Total ATMs ( 000) Domestic International Total Exhibit 4: GMR airport portfolio Project Delhi International Airport (DIAL) India Hyderabad International Airport (GHIAL) India Mactan - Cebu International Airport Annual Passenger Capacity 60 mn 12 mn Current - 5 Mn Phase I Planned - 15 Mn GMR Stake 54% 63% 40% Other Stakeholders Project cost Traffic in FY 2014 Concession Terms Airport Authority of India - 26% Malaysia Airports - 10% Fraport 10% Rs. 128 bn for Phase I ($ 2,143 mn) mn Pax; 313,962 ATMs years concession 46% Revenue share 230 acres Real Estate parcel Airport Authority of India - 13% Malaysia Airports - 11% Govt. of Andhra Pradesh 13% Rs. 29 bn for Phase I ($ 487 mn) 8.73 mn Pax; 88,131 ATMs years concession 4% revenue share 1,000 acres Real Estate parcel acres SEZ Megawide Construction - 60% Construction Capex - USD 325 Mn Upfront premium - USD 326 Mn - 25 years concession 8 acre Real Estate parcel Debt : Equity - 70:30 Roads division booked stake sale profits Revenues in the road division grew 41.1% YoY to crore during Q4FY14 as it has booked annuity income of 92 crore from Chennai ORR for which it was issued a provisional certificate for completion with effect from June 15, For FY14, road division revenues grew 34.1% to crore with a loss of crore. During the year, GMR completed divestment of 74% stake in Jadcherla and Ulundurpet projects wherein it booked a profit of 69.7 crore ( 14.6 crore for Ulundurpet and 55.1 crore from Jadcherla project) Traffic volumes grew 7% YoY for the Ambala Chandigarh project, while it declined ~8% and 2%, respectively, for Hyderabad Vijayawada and Hungund Hospet during Q4FY14 ICICI Securities Ltd Retail Equity Research Page 5

6 Exhibit 5: Road division performance crore Q4FY14 Q4FY13 Q3FY14 YoY(%) Q0Q(%) Revenue EBITDA Margin (%) , PAT (after MI) Margin (%) , Exhibit 6: GMR road portfolio GTAEPL Tuni Anakapalli Annuity based GTTEPL Tambaram Tindivanam GPEPL Pochanpalli GCORRPL Chennai Outer Ring Road GACEPL Ambala Chandigarh GHVEPL Hyderabad Vijaywada GOHHHPL Hungund Hospet GMR Stake 100% 100% 100% 90% 100% 90% 51% Road Length 59 kms 93 kms 103 kms 29 kms 35 kms 181 kms 99 kms Road Length (Lane kms) 236 kms 372 kms 412 kms 116 kms 140 kms 724 kms 396 kms Project Cost ( cr) Concession Period 17.5 years from May years from May years from September years from June years from May 2006 Toll based 25 years from April years from September 2010 ICICI Securities Ltd Retail Equity Research Page 6

7 Outlook and Valuation At the CMP, GMR is trading at 2.0x FY15 P/BV. With the peaking of debt level, passing away of key overhang such as restructuring of PE in GMR Energy, and narrowing of losses, we upgrade the stock to BUY with an SOTP based target price of 38/share. We now value the airport business (including real estate) at 26.5/share. Our airport valuation mainly consists of DIAL /share (airport - CoE of 13% & RE - of 14%). We have also valued the power business at 10/share and considered CoE of 13-15% across projects. We highlight that our power valuation is still at a 12% discount to GMR Energy CCCP s conversion pre-agreed valuation of 6000 crore. Other businesses are valued at 6.5/share. We also highlight that our valuation also incorporates conversion of GMR Infrastructure CCPS leading to ~9% dilution at the current market price. Exhibit 7: SOTP Valuation GIL s Equity Value (in crore) Value Per share ( ) Airports Real Estate 10, Roads 1, Power 4, Mines 1, SEZ EPC GIL s (Net Debt)/cash -1, Total Valuation 16, ICICI Securities Ltd Retail Equity Research Page 7

8 Company snapshot Target Price Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date May-09 Apr-10 Aug-10 Apr-11 Jul-11 Sep-11 Jan-12 Dec-12 Feb-13 Event UPA II formation with majority built up euphoria towards reform process and infrastructure investment GMR raised US$315 mn through QIB at 62.2/share Canadian fund bought out GMR stake in Intergan for US$1.1 bn, GMR booked losses on the same SBI Macquire invests US$200 mn in GMR Airport GMR Airports raises US$131 mn through CCP from StanC, JM Financials and others GMR won NHAI biggest road project of Kishangar Udaipur Ahmedabad project at aggressive bidding of 636 crore premium pa Receives AERA approval for tariff increase in DIAL Maldives government takes over Male Airport from GMR terminating the contract GMR earmarked its "Asset Light Asset Right strategy" and focuses to cut debt by ~ crore. Starts with 74% stake sale in Jadcherla assets for 206 crore Mar-13 GMR exits Singapore power unit for 2600 crore Sep-13 GMR divest 74% stake in Ulundurpet expressway for 222 crore Dec-13 GMR signed definitive agreement with Malaysian Airport to divest 40% stake at Euro 225 mn Feb-13 Revised terms with PE players in energy verticals and key overhang due to guaranteed IRR went away Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 GMR Group 31-Mar , Carmignac Gestion 31-Mar Life Insurance Corporation of India 31-Mar Athena Capital Partners LLP 31-Mar LIC Nomura Mutual Fund Asset Management Company Ltd 31-Mar The Vanguard Group, Inc. 31-Mar Dimensional Fund Advisors, L.P. 31-Mar Rajam Enterprises Pvt. Ltd. 4-Sep Kotak Mahindra Asset Management Company Ltd. 28-Feb DSP BlackRock Investment Managers Pvt. Ltd. 31-Mar Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Promoter FII DII Others Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Rajam Enterprises Pvt. Ltd. 5.76m 12.27m Athena Capital Partners LLP m m DSP BlackRock Investment Managers Pvt. Ltd. 2.15m 5.90m Norges Bank Investment Management (NBIM) -2.13m -5.31m Varalakshmi (G) 0.31m 0.94m ERSTE-SPARINVEST Kapitalanlagegesellschaft mbh -1.19m -3.18m Rao (Mallikarjuna G) 0.25m 0.92m IDFC Asset Management Company Private Limited -1.03m -2.95m Dimensional Fund Advisors, L.P. 0.03m 0.08m BlackRock (Singapore) Limited -0.99m -2.94m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 8

9 Financial summary Profit and loss statement Crore ( Crore) FY13 FY14 FY15E FY16E Net Sales 8, , , ,002.3 Growth (%) Op. Expenditure 5, , , ,616.5 EBITDA 2, , , ,385.8 Growth (%) Other Income Depreciation 1, , , ,595.0 EBIT 1, , , ,954.8 Interest 2, , , ,019.1 Extraordinary Item , PBT Tax Rep. PAT before MI , Minority interest (MI) Rep. PAT after MI , Adjustments , Adj. Net Profit , , Growth (%) NM NM NM NM EPS Cash flow statement Crore ( Crore) FY13 FY14 FY15E FY16E Net Profit before Tax Others Depreciation 1, , , ,595.0 Diect Tax Paid Int. & Finance charges 2, , , ,019.1 CF before chg in WC 3, , , ,139.7 Inc./(Dec.) in Curr Liab. 1, , ,444.6 Inc./(Dec.) in Curr Ass. 2, , ,649.7 CF from operations 2, , , ,934.6 Purchase of Fixed Ass. -5, , , ,780.8 (Inc.)/Dec. in Investment CF from Investing -5, , , ,780.8 Inc./(Dec.) in Debt 7, , ,433.5 Interest paid -2, , , ,019.1 Others -1, CF from Financing 3, , , ,452.6 Net Cash Flow , , ,701.2 Opening Cash 4, , , ,176.3 Closing Cash 5, , , ,877.6 Balance sheet Crore ( Crore) FY13 FY14P FY15E FY16E Liabilities Equity Capital Pref shares 1, , , ,155.6 Reserves & Surplus 6, , , ,466.1 Shareholders Funds 9, , , ,010.9 Minority Interest 1, , , ,874.9 Total Loans 42, , , ,957.7 Deferred Tax Liab Source of Funds 52, , , ,977.5 Assets Gross Block 29, , , ,988.2 Less: Acc. Depr. 5, , , ,392.9 Net Block 24, , , ,595.2 Capital WIP 19, , , ,715.7 Net Fixed Assets 43, , , ,310.9 Goodwill on consolidation 3, , , ,461.2 Investments Inventories Trade Receivables 1, , , ,750.6 Cash 5, , , ,877.6 Loans & Advanaces 9, , , ,751.0 Total Current Asset 16, , , ,829.2 Current Liab. & Prov. 10, , , ,503.4 Net Current Asset 6, , , ,674.2 Misc Expenditure Application of funds 52, , , ,977.5 Key ratios FY13 FY14 FY15E FY16E Per share data ( ) EPS Cash EPS BV DPS Operating Ratios (%) EBITDA Margin PBT Margin PAT Margin Inventory days Debtors days Creditors days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E NA NA NA NA Net Sales/Total Asset EV / EBITDA EV / Net Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio ICICI Securities Ltd Retail Equity Research Page 9

10 ICICIdirect.com coverage universe (Infrastructure) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) P/B (x) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E GMR Infra (GMRINF) Buy 13, NA NA NA GVK Power (GVKPOW) Hold 2, NA NA NA IRB Infra (IRBINF) Hold 6, JP Associates (JAIASS) Buy 17, NM NM Sadbhav Engg. (SADENG) 186 UR Buy 2, ICICI Securities Ltd Retail Equity Research Page 10

11 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ANALYST CERTIFICATION We /I, Deepak Purswani, CFA, PGDM (Finance); Bhupendra Tiwary, MBA (Finance), Nikunj Gala, MBA (CM) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. 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