>GVK POWER & INFRA (ICICI DIRECT)

All set for takeoff…

GVK Power & Infra (GVK PIL), India’s leading private sector diversified infrastructure play, has a presence in power, aviation, transportation, mining, oil & gas and SEZ. After initial hiccups in the power segment due to non-availability of gas, GVK PIL has now commissioned three gasbased power plants with an overall capacity of 901 MW in Andhra Pradesh. The new plants are operating at almost full capacity. In aviation also, Mumbai Airport (MIAL) went through a turbulent patch of passenger traffic de-growth of 9% in FY09. Passenger traffic is now showing signs of pick up. We expect growth to return from Q2FY10 onwards. Also, road traffic at Jaipur Expressway (JKEL) continues to see robust growth, which will support operating profitability of the road segment. JKEL has witnessed growth of 8.2% YoY in traffic in Q1FY10. We are initiating coverage on the stock with an OUTPERFORMER rating.

■ Mumbai Airport along with real estate – A valuable asset GVK is the developer and operator of the busiest airport in India and handles ~23 million passengers, commanding ~21.5% market share of the overall Indian aviation in passenger traffic. After the lean patch of passenger de-growth in FY09 passenger traffic is showing signs of revival. GVK is in the process of finalising the master plan for development and monetisation of 276 acres of land. The master plan is expected to be public by December 2009.

■ Four fold growth in capacity, merchant play to offer upside
GVK has commissioned the operations at JP-II and Gautami power plants scaling the overall generating capacity to 901 MW. Revenues of the power segment are expected to witness a near five fold jump to Rs 1,750 crore in FY10E. GVK is expected to get the requisite approval for
sale of 138 MW of power through merchant route by December 2009.

■ Valuations
At the current market price of Rs 44, the stock is trading at P/BV of 2.2x in FY10E and 2.0x in FY11E. We have adopted an SOTP based methodology by valuing each segment distinctly. Improving visibility of growth for their projects and allaying balance sheet concerns will help them scout for growth opportunities further. We are initiating coverage on the stock with an OUTPERFORMER rating.

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