The stock lost 3.83% yesterday to close at Rs.66.50. Post announcement of the results, punters battered down this stock. YoY, for current Q2, GMR Infra reported a 40% drop in net profit and that is all the market looked at and just remained sellers.
We, on our website have been recommending this stock right since the time we launched this site and continue to have conviction in the stock. Take a closer look at the performance we have analysed for GMR Infra and you will realise that the company remains very strong.
For second quarter ended 30th September 2009, net revenue rose 41% (YoY) and by 1% at Rs.1194.29 crore. Sector wise, on a YoY, the highest growth in net revenue was seen in the EPC division at 347%, followed by roads (151%), energy (25%) and airports grew 5%. And in terms of growth in EDIBTA, it was the airports sector which showed the highest growth on a YoY at 170%, followed by roads at 128%, EPC 70% while energy sector showed a de-growth of 1%.
EBIDTA was up by a healthy 54% (YoY) and 18% (QoQ) at Rs.380.06 crore. Given the kind of projects it has undertaken, it comes as no surprise to see higher depreciation outgo and interest costs have increased due to large borrowings for the various huge projects. Interest cost was up 70.86% (YoY) and 11% (QoQ) at Rs.177.14 crore. Depreciation rose 65% (YoY) and 3% (QoQ) at Rs.140.82 crore. Cash profit of the company was up 6% (YoY) and 23% (QoQ) at Rs.190.30 crore.
PAT on a YoY was down 40% but QoQ was up by a whopping 138% at Rs.53.61 crore. The growth in the topline and the EBIDTA levels indicate that the company continues to remain on solid ground. Just as the management of the company has indicated, when companies like GMR Infra take on large infra building projects, they usually build projects with capacities which are larger than the requirement. The Hyderabad airport project has been built by the company to handle a traffic of 12 million capacity but as against this, the current utilisation is around 6.5 million. And at this stage, costs overtake the earnings and it is this under utilisation of the infra capacity which drives down the PAT. And this is a phenomenon typical of all large infra companies and they start showing returns only after the initial 2-3 years.
During Q2, the company acquired 100% ownership interest in EMCO Energy Ltd (EMCO),which is developing a 600 MW coal based power plant, in two phases (of 300 MW capacity each) in the state of Maharashtra. This project has a 15-year debt component of Rs 2,610 crore. Axis Bank has arranged and syndicated the debt, for which the finances were tied up on October 21. Land acquisition, evacuation plans and water allocation for the two-phase project had been completed. Barge relocation work from Mangalore to Kakinada is on and the plant would be operational by end of current fiscal.
What indeed qualifies as ‘breaking news’ is that it will be inaugurating the airport at Istanbul, Turkey on 31st October 2009 and will be ready for commercial operations by second week of November, which is 12 months ahead of schedule.
GMR Infra is a long term stock. Such dips in PAT will be temporary and once it’s infra projects achieve better capacity, the returns would be equally baffling. Stay invested.
Source: Internet (by S P Tulsian www.premiuminvestments.in)
