Soaring airport biz makes this firm an appealing stock: Experts reveal why it is set to rise

Just two months ago, GMR was bidding against Adani Group for taking a piece of India's soaring airport business. In past few months, it has emerged as highest bidder for the Bhogapuram and Nagpur airports and received formal letter of award for the latter. This has taken GMR’s overall portfolio to seven airports. Expert at Edelweiss Securities highlighted that, capex at the Hyderabad (HIAL) and Goa airports is 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. Combining these factors, GMR Infrastructure has become an appealing stock on Dalal Street. 

Parvez Akhtar Qazi, Swarnim Maheshwari and Aditya Chandrasekar analysts at Edelweiss Securities said, “We recently met management of GMR Infrastructure (GMR) and are upbeat on the company’s growth prospects. The airport portfolio is in fine fettle with the addition of Nagpur, Bhogapuram and Crete airports that cement its position as the premier airport developer in the country.”

“With the Indian airport sector booming,  there are ample growth opportunities for the company in our opinion,” said the trio. 

The analysts also highlighted that, 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. 

Apart from airport business, analysts at Edelweiss added, “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.”

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Besides, management is focused on steady expansion of the airport vertical and repayment of corporate debt via asset monetisation, revealed Edelweiss.

Hence, the analysts reiterated saying, “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 an SoTP-based TP of INR23.”

On Wednesday, the share price of GMR Infrastructure ended at Rs 17.35 per piece down by 0.29% on Sensex. However, the company did touch an intraday high and low of Rs 17.65 per piece and Rs 17.35 per piece respectively. If we take into consideration Edelweiss’ target price, then GMR shares is placed to rise by nearly 33% ahead.