Saturday, August 11, 2012
GVK’s Q1FY13 results were dismal led by poor PLF across power plants, MMR expenses at JP-II and Gautami, muted show at airports, one time expenditure (~|30 crore) at MIAL and higher interest cost for additional stake acquisition of MIAL and BIAL. While, the near term pain on earnings is likely in terms of poor power segment performance and high interest cost, GVK is looking for PE deal at Airport and Road division, which could partially allay investors concern over funding gap across the business verticals. Furthermore, land monetisation at MIAL and environmental clearance for Hancock would be the key catalysts for the stock. Maintain BUY purely on valuation and near term trigger… We highlight that unavailability of gas supply at its power plants as well as interest burden to fund additional stake in MIAL & BIAL will weigh on bottomline. However, in our view, PE deal in Airport & Road division holds the key for stock price performance, going ahead as this would partially allay investors concerns over funding gap across airport & transportation verticals. Furthermore, land monetisation at MIAL and environmental clearance for Hancock would be the key near term trigger for the stock. We maintain BUY purely on attractive valuation.