Buy GVK Power and Infrastructure - Update Report - Motilal Oswal

GVK Power and Infrastructure (GVKP IN; Mkt Cap USD1b, CMP Rs28, Buy)

Regulatory uncertainties abound, valuations attractive; Buy with a target price of Rs41

We believe GVK's valuation factors in the value of the Power (Rs33b) and Roads (Rs11b) businesses, but completely ignores any value from Airports (Rs20b).

While regulatory uncertainties led to impairment in valuations, we believe that even a bear case value for the Airport business stands at Rs6b-12b (P/BV of 2-3x).

Over the past 12 months, there have been strong regulatory headwinds, impacting GVK's profitability and valuations.

GVK's outstanding equity commitment stands at Rs35b for projects under construction/development and in the pipeline.

Over the past 12-15 months, several new projects have been added to the portfolio and several development plans have been initiated. It has recently signed an MoU with the Government of Indonesia to develop two airports in Bali and Java, and is also on the lookout for acquisition of coal mines abroad/thermal projects in India.

Source : Equity Bulls

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