GMR Infra’s revenues in the recently concluded quarter were up 33% y-o-y to Rs11.8 billion, led by 135% y-o-y growth in the ‘other’ segment and 120% y-o-y growth in the roadways segment.
Growth in revenues of the other segment is on account of revenues from the Istanbul airport construction JV, which was not there in Q1FY09.
Revenues in the power segment increased 24% y-o-y on the back of increased gas supplies at the Vemagiri power plant and merchant sales of 136MUs for the quarter at an average realisation of Rs6.71 per unit.
The increase in revenues in the roadways segment is on account of new assets being added in the latter half and the quarter under review.
Despite an increase in power generation, fuel costs are lower by 3% on account of a change in the fuel mix. A combination of a 3% fall in fuel expenses and a 200%+ rise in other O&M expenses have kept EBITDA in check.
EBITDA for Q1FY10 came in at Rs3.2 billion (35% y-o-y growth), while EBITDA margin was maintained at 27.3% in Q1FY10 v/s 27.0% in Q1FY09.
A 71% y-o-y increase in depreciation and 132% y-o-y increase in interest expenses have caused profitability to substantially reduce.
Further, the 88% y-o-y growth in taxes - due to the jump in the effective tax rate from ~10.5% in Q1FY09 to ~33.8% in Q1FY10 - was due to the higher taxes on the international operations. Adjusted PAT is down 74% y-o-y in Q1FY10 to Rs240 million.
Management has clarified that it has no equity funding requirement during the current fiscal, expect for the minimal capitalisation required for the newly awarded roadway projects. We believe that what this effectively means is that projects due for completion in the next 3-4 years could get delayed.
We believe that though net revenues are in line with our estimates, profitability is much lower than expectation.
We maintain SELL recommendation on GMR Infrastructure with a SoTP target price of Rs110.