Friday, November 25, 2011

>GMR INFRASTRUCTURE: No near signs of relief

􀂄 Revenue better than our expectations: Sales in Q2FY12 were aided by a stable revenue growth in Airports of 27% YoY. There was a higher treasury income which led to higher sales growth. EPC revenues were robust on account of inhouse construction of BOT projects which was higher by 39% QoQ. Thus, for Q2FY12, revenues increased by 48% to Rs18.1bn as against our expectations of Rs13.5bn.

􀂄 Overall healthy volume growth: Pax traffic of DIAL increased by 23% YoY and (7.5%) QoQ to 8.2m. Similarly, HIAL experienced Pax growth of 14% YoY and 1.9% QoQ, respectively, at 2.1m. Turkey Airport experienced a 14% YoY/QoQ growth in Pax. Male Airport traffic was up by 3.4% QoQ. Number on units sold in power de-grew by 11.8% YoY to 1bn units and BOT Road traffic was up 5% YoY.

􀂄 EBITDA hit by Power sector: Consolidated airport EBITDA margin increased by 300bps at 28%, on account higher margins in Delhi Airport. Power, however, on consolidated basis, experienced an EBITDA margin de-growth of 400bps YoY and 200bps QoQ which was on account of higher input cost. EBITDA margin of BOTs increased by 400bps YoY at 87%, mainly on account of higher traffic growth.

􀂄 Forex gains adis PAT: Forex gains of Rs470m included in OI and higher treasury income reduced the impact of loss; however, adjusted loss stands at Rs950m which is lower than our expectation of Rs1.2bn. Segment-wise PAT contribution from Airport stood at Rs(1.3)bn, Power Rs(93)m,Roads Rs(51)m, BOT Rs(13)m and EPC Rs889m.

􀂄 Valuation: We have revised our estimates/TP downwards on account of higher interest cost. At CMP, the stock is trading at 1.4x FY13E earnings. Triggers ahead are resuming ADF collection at DIAL and gas allocation for 700MWs gas power plant which is nearing COD. Maintain ‘Accumulate’.

To read the full report: GMR INFRASTRUCTURE

>Indian Metals And Ferro Alloys Ltd

Faced by twin problems of dropping realisations and rising input costs, IMFA has come out with
disappointing set of numbers for Q2FY12. IMFA’s revenue declined by 4.8% YoY however on a
QoQ basis there is a growth of 9.8% to Rs.2,859.7 mn. Its EBITDA dropped significantly by 84.5% YoY to Rs.152.4 mn led by substantial rise in input costs by 45% YoY. The EBITDA margin for the quarter stood at 5.33% vs 32.74% in the corresponding quarter of the previous year. The raw material cost increase was led by higher coal and met coke costs. Due to seasonal factors availability of coal was a problem which resulted in higher dependency on e‐auction coal and imported coal. During the quarter the company relied on 90% e‐auction coal and 10% imported coal resulting in higher blended coal cost. Met coke prices were rock steady at ~$500/tonne which is acting as a further deterrent to the company’s performance given the adverse rupee dollar movement. The company’s power cost has more than doubled to Rs.5.5 per unit on the back of rise in the thermal coal prices. The company reported a loss of Rs.86.9 mn vs. profit of Rs.572.4 mn in Q2FY11.

Key Result Highlights:‐
• Ferro‐Chrome production for the quarter stood at ~48,500 tonnes which is up by 19.8% YoY.
The management is maintaining its FY12E guidance of ~210,000 tonnes.
• Its Ferro Chrome sales volume for Q2FY12 stands at ~52,427 tonnes vs. 52,500 tonnes of
• Average realization for the quarter stood at ~Rs.55,000/tonne down by 11% QoQ and 2.3%
YoY. Due to ongoing crisis in the European region Ferro Chrome prices have corrected and
are ruling at sub $1/lb (Spot Market). However, thermal coal prices in the domestic market
have started cooling off and the company has started receiving linkage coal from MCL
though in small quantities which will result in marginally lower coal costs on a sequential
basis. The company is looking at a blend of 40‐50% Linkage coal, 40%‐50% e‐auction coal
and ~10% imported coal for H2FY12E which will ease some input cost pressure going
Future Plans
• Power‐ IMFA is setting up a 120 MW power plant to enter into the power business which
would act as a standby power source for any further capacity expansions. One unit of 2x60
MW power plant is likely to get operational by Q4FY12E. Due to some unfortunate accident
at the plant site the commissioning of balance 60 MW is likely to get delayed by 4‐6 months.
The total capex involved for this power plant is Rs.5,950 mn of which the company has spent
~Rs.4,140 mn till Q2FY12. The company commissioned its 30MW dual fuel captive power
plant in August 2011 and is currently generating about 20MW. The plant is likely to stabilize
in a month’s time.
• Coal ‐ The Company received the stage‐II forest clearance for its Utkal coal block and is well
on track to start the coal mining operations by Q4FY12E. The company is targeting an output
of 1mn tons of coal in the first year which will be further ramped up to ~3mn tons in 3‐4
years. The company would be using this coal for its aforesaid 120 MW power plant as well as
the 138MW captive power plant, thus protecting the company from the vagaries of
fluctuating thermal coal prices. This coal project involves a capital expenditure of Rs.2,480
mn of which the company has invested Rs.2,140 mn till Q2FY12.

To read the full report: India Metals and Ferro Alloys