GMR Airports - Fundamental Analysis on unique bet on Rising Premiumisation

Summary

GMR Airports Infrastructure Limited evolving from GMR Infrastructure Limited is the recently listed pure play on Indian Airport Sector. 

GMR Airports Infrastructure Limited evolving from GMR Infrastructure Limited is the recently listed pure play on Indian Airport Sector. 

Company and Brand Evolution
Name Change - Reflecting its strategic focus the company has rebranded from GMR Infrastructure Ltd to GMR Airports Infrastructure Limited

Portfolio of WorldClass Assets

a. Delhi Airport DIAL- A cornerstone asset with a significant CAGR in passenger and cargo traffic Its the busiest airport in India and a major contributor to the company's growth
b. Crete Greece - The new airport in Crete is set to replace the existing Heraklion Airport aiming to boost tourism and economic growth in the region
c. Bhogapuram India - Located strategically on the East Coast this airport is expected to be a key driver for economic development in Andhra Pradesh
d. Cebu Philippines - As one of the fastest-growing airports in the Philippines it serves as a vital international gateway and a hub for tourism and commerce
e. Nagpur India - Positioned as a burgeoning center for ITITES logistics aerospace and manufacturing Nagpur airport is poised for significant growth
f. MOPA Goa India - Targeting the robust tourist sector this airport is expected to cater to a high volume of international and domestic passengers
g. Medan Indonesia - Serving as a Western international hub Medan is crucial for Indonesia's connectivity and economic expansion
h. GHIAL Hyderabad India - Acclaimed for its service quality and rapid growth Hyderabad Airport has been a consistent performer in passenger satisfaction and operational efficiency
i. Bidar India - With a long-term concession and a cost-plus revenue model Bidar Airport is set to become a regional aviation hub

Financial Performance Analysis

Q2FY24 Financials
Passenger Traffic Marked a 14% YoY increase at 265 million
Total Income Grew by 255 YoY to INR 218 billion
EBITDA Increased by 34% YoY reaching INR 85 billion
Net Debt Stood at INR 236 billion indicating the company's leverage and investment in growth

H1FY24 Financials
Passenger Traffic Saw a 25% YoY increase totaling 536 million
Total Income Rose by 38% YoY to INR 433 billion
EBITDA Climbed to INR 173 billion

Business and Operational Highlights
a. Merger of GAL with GIL -  A strategic move expected to streamline operations and financial reporting slated for completion within FY24
b. Capital Expenditure - The company is heavily investing in expanding its existing assets in Delhi Hyderabad and Crete which are progressing on schedule
c. Regulatory Developments - The TDSAT order in July 2023 regarding tariff determination for Delhi Airport marks a significant regulatory update impacting revenue and operational planning
d. Traffic Growth - Both domestic and international traffic showed robust growth indicating recovery and expansion in the postpandemic era

Strategic Focus and Future Outlook
a. Merger Completion - The GALGIL merger is a top priority expected to enhance operational efficiencies and financial synergies
b. Deleveraging Plans - Focused on reducing and refinancing debt the company aims to improve its financial health and credit ratings
c. Capital Expenditure - Timely completion of expansion projects is critical for enhancing capacity and service quality
d. Business Expansion - The company is looking to strengthen its non-aero adjacencies businesses and explore capex light opportunities particularly in services across key markets

Shareholding Pattern - The company has stable promoter holding since past few quarters

Financials - Being a burning and capital-intensive business, financial position is weak

Balance Sheet and Cash flows are weak considering nature of business it operates in






Management is led by a professional CEO and MD with strong oversight of promoters and independent Board of directors

Valuation - The valuation of the company are not at all cheap considering the fact they are currently having losses and negative networth. But in longer term future - earnings will aid sustainable valuations to the company




The major risk it faces is the long gestation period of the airport development business and competition risk from new players like Adani

Conclusion and View- With Restructuring and de-leveraging plans in place, GMR Airports is poised to grow on the back of a rising Airports network. GMR Airports offers unique opportunity to investors to bet on airports as the sector where very few players are available. Listing of Adani Airports will be the major valuation re-rating trigger for the company.