GMR Infrastructure Ltd

Transcription

1 July 20, 2017 GMR Infrastructure Limited (GIL) is engaged in generation of power, mining and exploration activities, development of highways, infrastructure development, such as development and maintenance of airports and special economic zone; construction business, including engineering, procurement and construction (EPC) contracting activities and operation of airports and special economic zones. The Company operates through the segments, including Airports, Power, Roads, EPC and Others. Its Airports segment is engaged in the development and operation of airports. Its Power segment is engaged in generation of power and provision of related services and exploration and mining activities. The Roads segment is engaged in the development and operation of roadways. The EPC segment is engaged in handling of engineering, procurement and construction solution in the infrastructure sector. The Others segment is engaged in urban infrastructure and other activities. Outlook : Over the FY13-17 period GMR s revenue and EBITDA have grown at a CAGR of 2.5% and 8.6% respectively. The EBITDA margins of the company are consistently improving and stands at 31.4% FY17. The company has brought down it s debt drastically during the year which inturn has helped them being down the finance cost. The company s strong order backlog and it s aggressive bidding strategy in the airport sector is seen as a positive of the company going forward. We expect the company s efforts to monetize it s assets to infuse capital in the coming years which will the profitability ratios. The expected compensation to be received by the company is also expected to infuse more funds which also help the margins. On the valuation front, at CMP of Rs. 20.0, the company is trading at EV/EBITDA multiple of 18.4x which is trading at a premium as compared to the industry and EV/EBITDA of 13.1x respectively. We assign a Buy on Dips, Strictly for very long term investors rating on this stock. Quarterly Snapshot : 4.8% Particular (RS. Mn) Q4FY17 Q4FY16 Revenue ation 3.9% 23.5% 7.6% 60.2% Airport Power Road EPC Others Change (YoY) Q3FY17 Change (QoQ) Total Revenue % % EBITDA (Excl OI) % % EBITDA Margin (%) 22.3% 70.9% (4870) Bps 54.0% (3170) Bps PAT % % NPM (%) % % (45930) Bps % (73590) Bps Rating Matrix CMP Rs Rating Buy on Dips, Strictly for very long term investors Current Level - Upside Potential - Target Period 5 Years 52 week H/L Rs. 22.1/10.2 Face value Re. 1 Sector Category F&O Stock Level of Risk at CMP Electric Utilities Large Cap Yes Safe Level: Risky Level: Shareholding Pattern Particulars Mar 17 Dec'16 Sept'16 Promoter 61.7% 61.7% 61.6% FII 20.4% 19.5% 19.6% DII 7.8% 7.9% 8.0% N-Insti. 10.1% 10.9% 10.8% Relative Capital Market Strength Jun Jul-16 Yearly Snapshot : 1,10, , , , , , , , Aug Sep Oct Nov Dec-16 GMR Infrastructure Ltd Total Revenue FY16 31-Jan Feb-17 EBITDA (Excl OI) FY17 31-Mar Apr May-17 Sensex PAT

2 Latest quarter analysis : GMR s revenue decreased by 31.1% to Rs mn in Q4FY17 as against Rs mn in Q4FY16. EBIDTA also decreased by 78.4% to Rs mn in Q4FY17 as against Rs mn in Q4FY16. EBITDA margins came in at 22.3% in Q4FY17 which decreased from 70.9% in Q4FY16. Profit after tax (PAT) decreased by 38.7% to Rs. ( ) mn in Q4FY17 from Rs. ( )mn in Q4FY16. Net profit margin stood at 2.7% vs 4.0% in Q4FY16. Break up of key expenditures include cost of materials consumed at Rs mn, employee cost at Rs.98.8 mn and Depreciation & Amortization exp. at Rs.39.7 mn and other expenses at Rs mn. Budget : The allocation towards infrastructure, this year has been increased to Rs.39lakh mn from Rs. 34.9lakh mn in the previous year. For the transportation sector including roads and ports in provision of Rs lakh mn has been made the allocation towards highways has increased from proximity Rs. 5,80,000 mn to Rs. 6,50,000 mn. This increased allocation indicate priority for the highway sector given by the government apart from this Rs. 2,70,000 mn, including these splits has been allocated towards rural roads plan in financially. Airport Sector: Bids for airport projects: GMR group plans to bid for airport projects in Serbia and Jamaica as it seeks to expand its airports business to more overseas countries. The Serbia airport project is expected to be worth Euro 400 million. The company also won the bid to build Goa's second airport last year through a BOT model with a concession period of 40 years which is extendable by 20 years, is also developing Mactan Cebu international airport in the Philippines in partnership with Megawide Construction Corp. The company is also looking to bid for a airport project in Vishakapatnam. Bagging airport project in Greece: The company s subsidiary GMR Airports Limited has been selected to develop, operate and manage the New International Airport of Heraklion at Crete in partnership with Greek infrastructure major TERNA S.A for a concession period of 35 years. The company will be the designated operated for the airport in the consortium of the project. Strong growth in Airport traffic during the year: The Delhi airport traffic grew by 19% during the year, whereas that of Hyderabad Airport increased by 22%, and the traffic in Cebu Airport (Philippines) increased by 12%. Real Estate Monetization for Delhi Airport: Delhi International Airport Ltd. (DIAL) completed bidding process for the development of Retail Assets with an FSI of 1.96 Lac sqm on a land parcel of acres. Transaction is subject to certain conditions precedents and necessary approvals. DIAL said there has been a reduction in dependence on bank debt. Refinancing of Debt: DIAL raised US$ Mn by way of 10 year 6.125% Bonds in October 2016, in the international market. The proceeds were used to entirely refinance the current outstanding Rupee Debt and ECB Borrowing. Traffic Growth Delhi Airport 18% Hydrabad Airport 22% Cebu airport 12% Airport No of Projects Delhi 2 Hydrabad 2 Mopa, North Goa 1 Phillippines 1 Greece 1 Energy Project Coal Based Projects Gas Based project Hydro Project- Under Construction Hydro Project- Under Devolopment Solar Project Wind Power Project 4 Coal Mines Capacity 3350 MW 1400 MW 180 MW 1800 MW 25 MW 3.4 MW 2 Each in India and Indonesia Highways Project No of projects Length (Kms) Annutity Project Toll Projects Urban Infrastructure Project Land Kakinada (AP) Acres Krishnagiri (TN) 3300 Acres Reduction in Debt: The gross debt has significantly fallen to Rs. 1,98,560mn in FY17 as compared to Rs. 3,74,800mn.

3 Expansion Activities in Delhi and Hyderabad: The company is planning to undertake expansion activities in Delhi on terminal as well as on the air side, to make air side improvements and in Hyderabad it is more on the terminal side. In Delhi the master plan has been approved by the government, the revision in the master plan, and that envisages a CAPEX of around Rs. 50,000 mn to Rs. 60,000 mn over the next four to five years. In Hyderabad they have a CAPEX plan of about Rs. 24,000 mn over the next three years. Majority of these financial activities are expected to be financed by internal sources. On the completion of CAPEX activities the passenger capacity is expected to increase upto 20Mn in the Hyderabad Airport and 80mn in the Delhi Airport. Energy Sector: Strategic Partnership: Tenaga National Berhad made a strategic primary investment of $300mn for a 30% fully diluted stake in GMR. The platform will explore for opportunities in Energy sector mainly in the areas of Transmission, Distribution and Renewables. The portfolio includes operational projects worth 2,300MW and 2,330MW under the development line. Compensation to be received: The company is yet to receive a Rs. 1,500 mn of compensation on account of Change in Law as well as Coal Pass-through. Once the dispute is resolved the company will achieve Rs. 850 to Rs. 1000mn per annum. GMR Kamlanga energy is to receive Rs. 7110mn out of which the company has they have received Rs. 2890mn. Revenue Revenue Airport Power Road 5651 EPC Others Results Results Airport Power Road EPC Others Disinvestment Activities: The company has released upto Rs. 41bn equity and reduced liabilities by Rs. 76bn through aggressive disinvestment. They divested 1 airport in Turkey, 1 power project in Singapore, 1 Coal Mine, 3 road projects, 2 transmission assets in Meru and aravali. Urban Development: GMR led consortium has been issued a Letter of Award for construction of 221 Km long Eastern Dedicated Freight Corridor railway project at a cost of INR Crore on EPC basis. With the award Company s EPC Order book is 71,000Mn. Aggressive Monetisations Efforts: The company is looking to monetize it s land in Kakinada to Hindustan Petroleum or GAIL which would bring in an additional Rs mn. The company is also taking efforts to monetize their land in Krishnagiri which could be acquired by the state government bringing in a another Rs. 15,000 to Rs. 16,000mn. Further the management is looking to further monetize it s highway business which would help the company reduce their debt Rs. 33,000mn from their actual equity flow. Further the company is looking to raise more fund in the future through an IPO in GMR Energy.

4 Financial Snapshot : Particulars (Rs. Mn) FY13 FY14 FY15 FY16 FY17 Revenue from operations Gr (%) 17.72% 6.80% 4.08% -3.66% 2.98% EBITDA (Excl OI) 24, EBITDA Margin (%) 24.83% 24.08% 23.04% 28.81% 31.38% PAT NPM (%) 0.88% 0.09% % % -5.22% Net Worth Total Assets Cash flow from Operations D/E (x) Current Ratio (x) Profitablity ratios (%) ROCE (%) 3.3% 2.4% 1.5% 3.4% 7.4% ROE (%) 1.2% 0.1% -45.4% -88.0% -9.8% ROA (%) 0.1% 0.0% -4.1% -4.7% -1.5% Efficiency ratios (x) Receivable days Inventory days Payable days Peer Comparison : Companies CMP ROE 12MR(%) M. Cap EBIDTA Margin EPS BVPS (Rs. Mn) (%) NPM (%) Ashoka Buildcon Ltd % % 2.2% Dilip Buildcon Ltd % % 6.7% GMR Infrastructure Ltd % -5.2% GVK Power & Infrastructure Ltd % -37.0% PNC Infratech Ltd % % 5.3% Reliance Infrastructure Ltd % % 5.8% Average % % -3.7% Companies P/E (x) P/Bv (x) P/Sales(x) EV/EBIDTA EBIDTA(Rs. D/E PAT(Rs. Mn) (x) Mn) Sales (Rs. Mn) Ashoka Buildcon Ltd Dilip Buildcon Ltd GMR Infrastructure Ltd GVK Power & Infrastructure Ltd PNC Infratech Ltd Reliance Infrastructure Ltd Average *The companies are compared on consolidated FY17 numbers

5 Choice s Rating Rationale The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next 12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least 5% over the next 12 months. Stocks between these bands are classified as Neutral. Don t be an Investor by Force, Be an investor by CHOICE Create a Wealth Building Portfolio with the help of CHOICE Fundamental Research. CHOICE Fundamental Research will handpick stocks for you to invest in an oversold market by helping you build positions in heavily beaten down fundamentally strong stocks. Opportunities to invest in fundamentally strong stocks at a low arise only 2-3 times in a full year cycle. Investors are advised to sell the stock if the recommended upside potential achieves. If recommended upside potential remains under-achieved, investors are advised to consider the update report on suggested stock. Fundamental Research Team Name Designation id Contact No. Satish Kumar Research Analyst satish.kumar@choiceindia.com Rajnath Yadav Research Analyst rajnath.yadav@choiceindia.com Sahil Nandkumar Research Associate sahil.nandkumar@choiceindia.com Anas Dadarkar Research Associate anas.dadarkar@choiceindia.com Aman Lamba Research Associate aman.lamba@choiceindia.com Dhvanit Wadia Research Associate dhvanit.wadia@choiceindia.com customercare@choiceindia.com Disclaimer This is solely for information of clients of Choice Broking and does not construe to be an investment advice. It is also not intended as an offer or solicitation for the purchase and sale of any financial instruments. Any action taken by you on the basis of the information contained herein is your responsibility alone and Choice Broking its subsidiaries or its employees or associates will not be liable in any manner for the consequences of such action taken by you. We have exercised due diligence in checking the correctness and authenticity of the information contained in this recommendation, but Choice Broking or any of its subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this recommendation or any action taken on basis of this information. This report is based on the fundamental analysis with a view to forecast future price. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Choice Broking has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Choice Broking makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice. The information and any disclosures provided herein are in summary form and have been prepared for informational purposes. The recommendations and suggested price levels are intended purely for stock market investment purposes. The recommendations are valid for the day of the report and will remain valid till the target period. The information and any disclosures provided herein may be considered confidential. Any use, distribution, modification, copying, forwarding or disclosure by any person is strictly prohibited. The information and any disclosures provided herein do not constitute a solicitation or offer to purchase or sell any security or other financial product or instrument. The current performance may be unaudited. Past performance does not guarantee future returns. There can be no assurance that investments will achieve any targeted rates of return, and there is no guarantee against the loss of your entire investment. POTENTIAL CONFLICT OF INTEREST DISCLOSURE (as on date of report) Disclosure of interest statement Analyst interest of the stock /Instrument(s): - No. Firm interest of the stock / Instrument (s): - No Choice Equity Broking Pvt. Ltd. Choice House, Shree Shakambhari Corporate Park, Plt No: , J.B. Nagar, Andheri (East), Mumbai