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Buy GMR Infrastructure, target Rs 23: Edelweiss Securities

Buy GMR Infrastructure at a price target of Rs 23.

Last Updated: Mar 15, 2019, 03.22 PM IST
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The current market price of GMR Infrastructure is Rs 17.
Edelweiss Securities has a buy call on GMR Infrastructure with a target price of Rs 23.

The current market price of GMR Infrastructure is Rs 17.

Time period given by analyst is one year when GMR Infrastructure price can reach the defined target.

Investment rationale by the brokerage-
Airports business soaring: Having emerged as the highest bidder for the Bhogapuram and Nagpur airports, GMR’s airport portfolio now spans seven airports. The company has recently received the formal letter of award for the Nagpur airport. While capex at the Hyderabad (HIAL) and Goa airports are already underway, about Rs 90bn of capex for DIAL is likely to be incurred from FY20. Management expects a consultation paper for DIAL to be released over the next month and the final tariff order around mid-CY19. With the Indian airport sector booming, there are ample growth opportunities for the company in our opinion.

Power and road portfolios bouncing back: After a tough couple of years when issues with coal availability/tariffs and traffic growth dragged the power and road segments’ performance, these verticals are now reviving. In the roads segment, the company has covered ground with improving traffic paring losses. In power, higher coal supplies and tariff approval have energised the Kamalanga and Warora plants into generating cash profits. Management does not have any capex plans for these segments and intends to consolidate its operations thereof.

Outlook and valuation- Attractive; maintain ‘BUY’: A growing airports portfolio coupled with favourable policy/regulatory actions reinforce our view that GMR is the most exciting play on the fast-growing Indian airport sector. Favourable tariff orders and steady monetisation of non-core assets, which could lead to deleveraging, are the key catalysts for the stock in our view. Maintain 'BUY/SO' with a SoTP-based target price of Rs 23.

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