Global brokerage Jefferies imitated coverage on GMR Airports Infrastructure Ltd. with a Buy call and a base case target price of 100 rupees per share amid upbeat prospects due to traffic growth and travel retail opportunity.

GMR is the largest private airport operator in India and operates two of the busiest airports (New Delhi/Hyderabad) and has a cumulative 27% share in passenger traffic in India, Jefferies said in an investor note.

The attractiveness of airports business is primarily driven by the monopolistic business model, strong air traffic growth outlook in India, lucrative travel retail business potential and ability to monetize real estate, it added.

Jefferies said the passenger cap at Delhi Airport has grown recently from 66 million to 100 million and it is slated to increase at Hyderabad Airport from 12 million to 34 million, while recently commissioned Goa Airport (4.4 million cap) is amid ramp up. This could drive a 11% passenger traffic CAGR over FY24-FY27E, it noted.

Further, near tripling of aero tariffs at Delhi Airport for next control period (FY25-FY29), higher tariff at Hyderabad, and new tariff at Goa Airport (with effect from FY25) will all boost revenue/EBITDA growth over FY24-FY27, Jefferies said.

It projected EBITDA CAGR of 32% for the company over FY24-FY27.

The brokerage said GMR is also capitalizing on its partnership with global airport major (ADP) to develop its retail strategy as well as also working to consolidate all non-aero businesses under a platform to reduce complexity and leverage economies of scale.

Jefferies said GMR Airports is also at the last leg of simplification of the corporate structure to merge GMR Airport Ltd., the existing airport platform, with the listed company. The merger would strengthen the strategic relationship with ADP by bringing them to the listed company level and also allow improvement in upstreaming of airport free cash flows, it added.

“GMR Airports is evolving from utility to a retail consumption play and is slated to benefit from the strong air traffic growth outlook, travel retail opportunity (led by top end consumption), upward reset in aero tariffs and real estate unlocking opportunity,” equity analysts Prateek Kumar and Graham Hunt said in the note.

The brokerage has a target price of 120 rupees on GMR Airports, based on its upside scenario assumptions.

The stock rose 0.9% to 87.75 rupees on the National Stock Exchange in early Mumbai trading today.

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