GMR Infra: Upsides built in

The GMR Infra stock has corrected from the Rs 178 levels that it hit in early June to Rs 139. While the valuations are more reasonable now at just under four times forward price to estimated book value, they still seem a tad expensive.

The company’s net sales for 2008-09 were fairly good rising by 75 per cent to Rs 4,019 crore, with the company beginning to recognise revenues from the construction joint venture for the Sabiha Gokcen airport. That made up for the shortfall in airport revenues. While the net profits were up 33 per cent at Rs 280 crore, they received a boost because foreign exchange losses, to the tune of Rs 180 crore, were added to the cost of assets compared with the earlier policy of routing them through the profit and loss account.

Adjusting for that the rise in profits would have been lower. According to JP Morgan, the profits of the airport and power segment trailed estimates; the operating profit from the power segment was lower than estimated because of lower utilisation at the Vemagiri power plant.

With a stable government in power and infrastructure expected to be a focus are, GMR Infra’s projects should do well. Also with the e economic environment improving, traffic at the Hyderabad and new Delhi airports should pick up. Macquarie Research has a target price for the stock of Rs 104.