‘Buy’ on GMR Infrastructure; FV increased 10% to Rs 49

We focus on Mopa Airport (Goa) and estimate $300 mn overall equity investment to yield 3X price to book. Adjusted for GMRI’s stake in airports, this increases its FV by 10% to Rs 49. BUY.

The eventual capacity is 4-5X phase I capacity.

Leveraging platform to create value through recent order wins: The airport additions to GMRI’s portfolio in Goa and Medan (Indonesia) would leverage its capabilities and partnership with Groupe ADP in creating large airports (eventual capacity at 4-5X existing throughput) and ecosystem. We focus on Mopa Airport (Goa) and estimate $300 mn overall equity investment to yield 3X price to book. Adjusted for GMRI’s stake in airports, this increases its FV by 10% to Rs 49. BUY.

Mopa airport can be meaningfully value accretive across the three key dimensions: Phase I of the Mopa airport project (7.7 mn pax) is 50% complete and is being fast-tracked to be commissioned by August 2022. The eventual capacity is 4-5X phase I capacity.

Eventual capacity may get utilised in first 15-20 years of the 60-year concession: We envisage volumes at Mopa airport becoming 4X of phase I capacity by FY2035. Such growth would make it reach its eventual design capacity in 15 years of signing the concession period.

The concession period is for 40+20 years. We note growth supports in (1) strong double-digit CAGR seen in the state’s air volumes over FY2011-19 continuing and (2) limitations to grow the existing Dabolim airport beyond the current capacity expansion programme.

Spending per pax (SPP) likely to be the best across Indian airports: We estimate the SPP at the Mopa airport to be 2X of Delhi airport based on (1) a much better spending profile of domestic and international passengers and (2) much higher eventual share of international pax in airport volumes. In such a context, we note leisure being the dominant purpose for travel to Goa, international tourists dominating international pax mix and relative attractiveness of Mopa airport for international tourists given proximity to north Goa.

Improving connectivity to north Goa and land policy on gaming can boost real estate prospects: The commissioning of the recently awarded 6-laning highway award will bring beach destinations in north Goa within 40 minutes of the airport, boosting prospects of setting hotels in the 232 acres of associated real estate. We also note prospects of casinos coming up, subject of the land policy. We take comfort in the state of Goa recently giving in-principle approval to setting up of an integrated resort near Mopa airport spread over 100 acre, where Deltin Corp would house electronic casinos to start with. Deltin Corp has shared interest to acquire 50 acres more and may consider Mopa airport’s real estate.

We increase FV by 10% to Rs 49 primarily on value creation from the Goa airport: We value the potential $300 mn equity investment over time by GMR Airports into the Mopa project at 3X price to book and reflect the proportionate share of GMRI in the $600 mn implied gain in its SoTP.

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