Airport revenues on a thaw, Power awaiting its turn February 11, 2013 Rupa Shah rupashah@plindia.com +91-22-66322244 Rating Accumulate Price Rs19 Target Price Rs21 Implied Upside 10.5% Sensex 19,461 Nifty 5,898 (Prices as on February 11, 2013) Trading data Market Cap. (Rs bn) 67.5 Shares o/s (m) 3,641.3 3M Avg. Daily value (Rs m) 296.5 Major shareholders Promoters 71.64% Foreign 10.78% Domestic Inst. 7.34% Public & Other 10.24% Stock Performance (%) 1M 6M 12M Absolute (9.1) (13.9) (37.9) Relative (8.0) (24.8) (47.5) How we differ from Consensus EPS (Rs) PL Cons. % Diff. 2014-0.4 0.6 NA 2015 0.8 1.7 52.8 Price Performance (RIC: GMRI.BO, BB: GMRI IN) (Rs) 35 30 25 20 15 10 5 0 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13! Revenue tad better than our expectations: A stable performance on the Airport front (up by 65% YoY, excl. Male) was marred by lower EPC (-16% YoY) and Power (-12.8% YoY) revenues. Thus, revenues increased by 7.8% to Rs23.5bn against our expectations of Rs22.4bn.! Volume analysis: Pax traffic of DIAL was down 8.5% YoY and up 16.3% QoQ at 8.6m. ATMs also followed the above trend and were down by 10.7% QoQ and up by 1.2% YoY, while cargo was flat YoY and up by 3.7% QoQ. Similarly, HIAL experienced a YoY fall and QoQ jump in Pax (2.1m), ATMs (0.02m) and Cargo (0.2 tonnes) volumes. Turkey Airport experienced a 10% YoY growth in Pax. Number of units sold in power de-grew by 58% YoY and 25% QoQ to 367m units and BOT Road traffic was up 20.7% YoY.! EBITDA fares well: Consolidated airport EBITDA margins were up by 1200bps YoY at 37% on account of revision in aero chares at DIAL. Power, however, on a consolidated basis, experienced an EBITDA loss, mainly on account of lower PLFs in gas-based plants and stoppage in mining activities at coal mines. EPC segment clocked margins at 15%.! Persistant QoQ losses remain: For Q3FY13, forex losses stood at Rs320m, thus, loss after minorities was at Rs2.8bn. Segment-wise PAT contribution from Airports stood at Rs(218)m, Power Rs(1.5)bn, Roads BOT Rs(172)m and EPC Rs366m.! Valuation: At CMP, the stock is trading at 1.2x FY15E P/BV. Gas/coal shortage for nearly 3000MWs power plant, which is nearing COD, is the overhang. Though operational performance of existing assets has shown some improvement, pressure on financials will persist as cash flow continues to suffer going forward. Maintain Accumulate. Key financials (Y/e March) 2012 2013E 2014E 2015E Revenues (Rs m) 83,201 97,603 131,618 154,525 Growth (%) 44.1 17.3 34.9 17.4 EBITDA (Rs m) 16,645 21,842 33,137 39,892 PAT (Rs m) (7,336) (6,277) (1,627) 3,117 EPS (Rs) (1.9) (1.6) (0.4) 0.8 Growth (%) (26.3) (14.4) (74.1) (291.6) Net DPS (Rs) Profitability & Valuation 2012 2013E 2014E 2015E EBITDA margin (%) 20.0 22.4 25.2 25.8 RoE (%) (9.6) (9.1) (2.6) 4.9 RoCE (%) (0.2) 1.2 2.6 3.7 EV / sales (x) 4.6 4.7 3.3 2.6 EV / EBITDA (x) 22.8 20.9 13.1 10.2 PE (x) (9.8) (11.5) (44.4) 23.2 P / BV (x) 1.0 1.1 1.2 1.1 Net dividend yield (%) Q3FY13 Result Update Source: Bloomberg Source: Company Data; PL Research All Nos. are Consolidated PrabhudasLilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/or seeks to do business with companies covered in its research reports. As a result investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of the report. Investors should consider this report as only a single factor in making their investment decision. Please refer to important disclosures and disclaimers at the end of the report
Exhibit 1: Q3FY13 Result Overview (Rs m) Y/e March Q3FY13 Q3FY12 YoY gr. (%) Q2FY13 9MFY13 9MFY12 YoY gr. (%) Net Sales 23,563 21,851 7.8 23,719 73,008 62,208 17.4 Expenditure Consumption of Fuel 1,955 3,528 (44.6) 2,207 7,810 11,082 (29.5) % of Net Sales 8.3 16.1 16.1 10.7 17.8 Increase/Decrease SIT 133 (501) NA (10) 30 (332) % of Net Sales 0.6 (2.3) 0.3 0.0 (0.5) Generation & Operation expenses 6,795 5,144 32.1 6,663 20,665 13,604 51.9 % of Net Sales 28.8 23.5 23.4 28.3 21.9 Purchase of traded goods 3,296 4,071 (19.0) 3,709 10,872 9,944 9.3 % of Net Sales 14.0 18.6 15.9 14.9 16.0 Employee cost 1,421 1,926 (26.2) 1,936 4,936 5,125 (3.7) % of Net Sales 6.0 8.8 8.4 6.8 8.2 General & Admin Exps 4,342 3,620 19.9 4,168 12,348 10,019 23.3 % of Net Sales 18.4 16.6 21.0 16.9 16.1 Total Expenditure 17,941 17,787 0.9 18,672 56,661 49,441 14.6 EBIDTA 5,622 4,064 38.3 5,047 16,348 12,767 28.0 Margin (%) 23.9 18.6 21.3 22.4 20.5 Depreciation 2,581 2,432 6.1 2,565 7,676 7,372 4.1 EBIT 3,042 1,632 86.3 2,482 8,672 5,395 60.7 Interest 5,263 4,239 24.2 4,852 14,909 11,885 25.4 Other Income 876 1,334 (34.3) 1,072 2,889 3,237 (10.7) Exceptional (320) (199) (188) (44) 205 PBT (1,665) (1,472) NA (1,487) (3,391) (3,048) NA Tax 495 445 NA 543 1,888 1,685 NA Tax Rate (%) (29.7) (30.2) (36.5) (55.7) (55.3) Reported Pat (2,159) (1,917) NA (2,029) (5,279) (4,733) NA Minority Interest (25) 837 237 369 2,361 Net Profit After MI (2,185) (1,080) NA (1,793) (4,911) (2,373) NA Source: Company Data, PL Research February 11, 2013 2
Exhibit 2: Segmental Break up (Rs m) Y/e March Q3FY13 Q3FY12 YoY gr. (%) Q2FY13 QoQ gr. (%) Segment results Airports 15,985 11,130 43.6 14,691 8.8 % in Total 67.2 50.1 61.2 Power 5,206 5,980 (12.9) 6,450 (19.3) % in Total 21.9 26.9 26.9 Roads 1,238 1,015 22.0 1,065 16.3 % in Total 5.2 4.6 4.4 Others 1,534 1,420 8.0 1,429 7.4 % in Total 5.6 7.2 6.3 EPC 3,404 4,056 (16.1) 3,737 (8.9) % in Total 12.4 20.7 16.4 Less: Inter-segment Revenue 3,587 1,367 162.5 3,387 5.9 Net sales 23,780 22,234 7.0 23,985 (0.9) EBIT Airports 2,828 868 225.7 2,155 31.3 Margin (%) 17.7 7.8 14.7 Power (573) (146) 293.1 (180) 219.1 Margin (%) (11.0) (2.4) (2.8) Roads 670 546 22.7 574 16.8 Margin (%) 54.1 53.8 53.9 Others 979 1,156 (15.2) 703 39.4 Margin (%) 63.8 81.4 49.2 EPC 504 311 62.1 121 318.6 Margin (%) 14.8 7.7 3.2 Total 3,304 2,498 32.3 2,834 16.6 Margin (%) 13.9 11.2 11.8 LESS: Interest 4,958 3,969 24.9 4,321 14.8 PBT (1,655) (1,472) 12.4 (1,487) 11.3 Source: Company Data, PL Research February 11, 2013 3
Exhibit 3: Operating Metrics (Rs m) Y/e March Q3FY13 Q3FY12 YoY gr. (%) Q1FY13 QoQ gr. (%) Revenues Airports 6,618 3,991 65.8 5,787 42.4 Delhi Airport 4,361 1,988 119.4 3,490 69.5 Hyderabad 1,432 1,378 3.9 1,381 (6.2) Turkey 825 625 32.0 916 12.3 Male 5,112 5,863 (12.8) 6,347 (5.0) Power 1,212 1,015 19.4 1,065 19.7 Highway 3,404 4,056 (16.1) 3,737 40.2 Urban Infra & EPC 1,534 1,421 8.0 1,429 107.3 Total 17,880 16,346 9.4 18,365 29.3 PAT After MI by Businesses Airports (219) (1,431) (84.7) (221) (492.3) Delhi Airport 47 (1,209) (224) (556.3) Hyderabad 45 20 125.0 132 18.9 Turkey (311) (242) 28.5 (129) 141.9 Male (1,487) (886) 67.8 (1,162) 120.0 Power (172) (42) 309.5 (138) 115.2 Highway 366 311 17.7 79 (662.0) Urban Infra & EPC (215) 617 (134.8) (341) 63.0 Total (1,727) (1,431) 20.7 (1,783) 67.5 Source: Company Data, PL Research February 11, 2013 4
Income Statement (Rs m) Net Revenue 83,201 97,603 131,618 154,525 Raw Material Expenses 51,996 75,761 98,481 114,633 Gross Profit 31,205 21,842 33,137 39,892 Employee Cost 3,123 Other Expenses 11,437 EBITDA 16,645 21,842 33,137 39,892 Depr. & Amortization 10,345 10,523 13,542 15,789 Net Interest 16,531 20,467 22,356 22,228 Other Income 1,750 3,774 3,121 3,048 Profit before Tax (8,481) (5,374) 360 4,923 Total Tax 2,107 2,403 2,641 2,462 Profit after Tax (10,588) (7,777) (2,281) 2,462 Ex-Od items / Min. Int. (5,858) (1,500) (654) (655) Adj. PAT (7,336) (6,277) (1,627) 3,117 Avg. Shares O/S (m) 3,892.1 3,892.1 3,892.1 3,892.1 EPS (Rs.) (1.9) (1.6) (0.4) 0.8 Cash Flow Abstract (Rs m) C/F from Operations (18,327) 50,206 23,298 33,467 C/F from Investing (20,503) (100,464) (79,790) (53,963) C/F from Financing 52,049 39,547 53,662 19,895 Inc. / Dec. in Cash 13,220 (10,711) (2,829) (601) Opening Cash 33,732 46,952 36,241 33,412 Closing Cash 46,952 36,241 33,412 32,812 FCFF (29,080) (57,671) (57,845) (19,841) FCFE 82,443 9,992 (85,258) (47,886) Key Financial Metrics Growth Revenue (%) 44.1 17.3 34.9 17.4 EBITDA (%) 8.4 31.2 51.7 20.4 PAT (%) (26.3) (14.4) (74.1) (291.6) EPS (%) (26.3) (14.4) (74.1) (291.6) Profitability EBITDA Margin (%) 20.0 22.4 25.2 25.8 PAT Margin (%) (8.8) (6.4) (1.2) 2.0 RoCE (%) (0.2) 1.2 2.6 3.7 RoE (%) (9.6) (9.1) (2.6) 4.9 Balance Sheet Net Debt : Equity 4.1 6.1 5.8 5.1 Net Wrkng Cap. (days) (419) (390) (401) Valuation PER (x) (9.8) (11.5) (44.4) 23.2 P / B (x) 1.0 1.1 1.2 1.1 EV / EBITDA (x) 22.8 20.9 13.1 10.2 EV / Sales (x) 4.6 4.7 3.3 2.6 Earnings Quality Eff. Tax Rate (24.8) (44.7) 732.6 50.0 Other Inc / PBT (63.2) (70.2) 865.8 61.9 Eff. Depr. Rate (%) 3.8 2.9 3.0 3.1 FCFE / PAT (1,123.8) (159.2) 5,241.8 (1,536.5) Source: Company Data, PL Research. Balance Sheet Abstract (Rs m) Shareholder's Funds 75,377 62,798 62,211 65,520 Total Debt 353,819 421,482 394,069 366,024 Other Liabilities 16,935 20,419 21,074 21,730 Total Liabilities 446,131 504,699 477,354 453,274 Net Fixed Assets 391,882 483,942 473,477 465,213 Goodwill Investments 18,641 26,523 24,512 24,512 Net Current Assets 35,607 (5,769) (20,638) (36,454) Cash & Equivalents 46,952 36,241 33,412 32,812 Other Current Assets 75,105 74,043 90,640 112,314 Current Liabilities 86,450 116,053 144,690 181,580 Other Assets 1 2 3 4 Total Assets 446,131 504,698 477,354 453,274 Quarterly Financials (Rs m) Y/e March Q4FY12 Q1FY13 Q2FY13 Q3FY13 Net Revenue 20,993 25,336 20,142 23,563 EBITDA 3,138 5,679 5,124 5,622 % of revenue 14.9 22.4 25.4 23.9 Depr. & Amortization 2,234 2,530 2,565 2,581 Net Interest 4,646 4,804 4,852 5,263 Other Income 727 1,405 806 876 Profit before Tax (5,434) (250) (1,487) (1,665) Total Tax 422 850 543 495 Profit after Tax (3,662) (943) (1,793) (2,185) Adj. PAT (4,721) (1,426) (1,793) (2,185) Key Operating Metrics Airports (Rs m) 30,047 47,120 47,890 47,373 Power (Rs m) 24,568 28,316 52,455 72,700 Roads (Rs m) 5,522 4,543 14,150 18,085 Others (Rs m) 17,656 17,624 17,124 16,367 Blended EBIDTA Marg. (%) 20.0 22.4 25.2 25.8 Int. as a % to sales 19.9 21.0 17.0 14.4 Int. Rate (%) 4.5 4.4 5.2 5.4 Capex (Rs bn) 31.6 92.6 81.8 54.0 NCA/Sales (%) 62.9 (5.9) (15.7) (23.6) Debt (Rs bn) Source: Company Data, PL Research. February 11, 2013 5
Prabhudas Lilladher Pvt. Ltd. 3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209 Rating Distribution of Research Coverage % of Total Coverage 60% 50% 40% 30% 20% 10% 0% 55.9% 24.6% 18.6% 0.8% BUY Accumulate Reduce Sell PL s Recommendation Nomenclature BUY : Over 15% Outperformance to Sensex over 12-months Accumulate : Outperformance to Sensex over 12-months Reduce : Underperformance to Sensex over 12-months Sell : Over 15% underperformance to Sensex over 12-months Trading Buy : Over 10% absolute upside in 1-month Trading Sell : Over 10% absolute decline in 1-month Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly This document has been prepared by the Research Division of Prabhudas Lilladher Pvt. Ltd. Mumbai, India (PL) and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accept any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. We may from time to time solicit or perform investment banking or other services for any company mentioned in this document. February 11, 2013 6