BofA initiated coverage on GMR Airports Ltd. with a buy rating and a target price Rs 128 apiece, which implies 21% upside potential from current levels. The Hyderabad and Delhi airports operator has a stellar outlook for earnings growth amid India's rising travel demand.
Bofa values GMR Airports at 15 times adjusted enterprise value and Ebitda, factoring regulatory adjustments and land-bank value as an attractive relative to future growth. It was adjusted for an estimated 11% Ebitda boost from a recent Delhi regulatory win.
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The company will likely report 25% Ebitda CAGR in period from financial year 2025 to financial year 2029, the global brokerage said.
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This appears inexpensive compared to Ebitda CAGR of 25% during the period from financial year 2025 to financial year 2029. It is also inexpensive compared with other Asian airports in China and Thailand during their high-growth base, according to the brokerage.
Opening of the Pakistani airspace regulatory clarity around the hypothetical Regulatory Asset Base, and execution on its non-aero and real estate strategies are going to act as catalysts for GMR Airports Ltd., BofA said in a note on Tuesday.
GMR Airports' core business is leveraged to rising Indian travel demand as income level increases along with airport expansion. Regulatory risk is skewed toward the upside, with recent regulatory decisions suggesting a significant increase for Delhi-regulated profit from financial year 2030, according to BofA.
Key risks for GMR Airports is a temporary traffic disruption because of Noida International Airport. Regulator may take aggresive approach at upcoming resets. Geopolitical risks may cause some ongoing disruption to Delhi flights. Elevated balance can also impact.
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