GMR Airports Gets 'Buy' Rating As Citi Initiates Coverage

Citi Research has initiated coverage on GMR Airports with a 'buy' rating, citing a strong mid-term growth outlook that justifies a valuation premium. The brokerage has set a target price of Rs 90, based on a sum-of-the-parts valuation.

GMR Airports is well-positioned to benefit from India's projected passenger volume growth, which is expected to see a compound annual growth rate of 8% over FY24-27, according to the brokerage.

The company's assets, including the Delhi airport with its four runways, are strategically placed to capture long-term growth, especially compared to the capacity-constrained Mumbai airport.

GMR Airports is forecasted to turn profitable by fiscal 2026, driven by an 8% traffic growth and a significant tariff increase at the Delhi airport. Citi expects the company's earnings for FY27 to be 5-6% above market expectations, supported by a 2.4 times tariff increase at Delhi and a 7.5% annual increase in non-aero spending per passenger, across its airports in Delhi, Hyderabad, and Goa.

Citi's target price of Rs 90 implies a 20 times FY27 EV/Ebitda, which is double the average for Asia-Pacific airports, but still lower than the 25 times seen during the peak of Chinese tourism and duty-free booms. The brokerage sees GMR Airports' strong traffic outlook, potential for increased non-aero spending, and opportunities from government airport privatisations as key growth drivers.

While Citi is optimistic about GMR Airports' prospects, it also notes potential risks, including slower-than-expected traffic growth and negative equity market conditions. However, high-single-digit traffic growth and airport privatisation rollouts will act as positive catalysts for the stock, the brokerage said.