The shares of GMR Airports, one of the world's leading airport operators, are expected to rally as much as 19% from current market levels due to robust growth levers in the coming quarters. This is attributed to several factors, including the rise in affluent sections in India, evolving spending patterns, and strengthening cash flows.
There are six key reasons why analysts are bullish on GMR Airports. Firstly, the rise in affluent sections in India has led to significant premiumisation in consumption, resulting in increased international travel and non-aero spends. GMR Airports, with its presence in critical airports such as Delhi and Hyderabad, is well-placed to benefit from this trend.
The rise in international travel is a critical driver, with metro airports expected to witness a strong rise in non-aero revenue. Analysts estimate that non-aero sales across key metro or JV airports can grow at a CAGR of 10% over FY26-28E, driven by higher air passengers and increased spending penetration.
GMR Airport is set to exit its capex-intensive phase, leading to moderated capex intensity and strong cash generation. With lower royalty outgo, healthy cash flows are expected to support sustainable positive PAT from FY26 onwards.
GMR Airports has a sizable unutilised land bank of over 100 acres at DIAL, which is planned to be monetised through a development-led model. This could emerge as a key driver of value unlocking for GMR Airports, with potential upside not currently factored into estimates.
The establishment of Safran's LEAP engine overhaul facility at Hyderabad is likely to support growth in GMR's MRO operations. Additionally, GMR's push to build cargo hubs at Hyderabad and DIAL offers additional optionality, though the outlook remains cautious.
The corporate structure has been simplified, addressing investor concerns. Promoter share pledges have been reduced, and leverage metrics have improved, leading to improved governance levels.
Despite the positive outlook, there are risks emerging from traffic diversion to Noida, impact of Hindon on domestic flows, and shifting international traffic towards Mumbai. The planned listing of Adani Airports could also intensify competition for investor wallet share.
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple factors before making any investment decisions.
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