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GMR Airports Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤14th Feb 26

Summary : GMR Airports reported record Q3FY26 financial and operational performance, driven by strong traffic, tariff revisions, and non-aero growth, with a positive outlook for future expansion and debt reduction.

Management Perspective positive : Management consistently highlighted record financial performance, strong operational growth, and an optimistic outlook for future expansion and profitability, referring to the business as being at a 'takeoff stage'.

Concall Report Analysis & Insights

Business Overview

  1. Q3FY26 total income rose 49% YoY to INR40.8 billion, driven by core assets and tariff revisions.
  2. EBITDA grew 65% YoY to INR17.9 billion, with margins improving to 55%, setting new records.
  3. Reported PAT (excl. exceptional items) was INR3.6 billion, marking the first positive profit since de-merger.
  4. GAL operated airports handled 31.9 million passengers, up 2.5% YoY, a record despite early December disruptions.
  5. Delhi Airport's aero revenues surged 173% YoY due to revised tariffs, contributing to record EBITDA and positive PAT.

Future Growth Prospects

  1. Global aviation demand remains resilient into 2026, with India as a key structural growth market.
  2. Airline fleet expansion is encouraging, with ~50 net aircraft additions expected for Indian carriers next year.
  3. Non-aero businesses are scaling, with new duty-free stores and F&B outlets opening at Hyderabad.
  4. Bhogapuram Airport is 95.8% complete and expected to operationalize in Q2FY27, ahead of schedule.
  5. Long-term strategy includes real estate monetization through self-development, with new guidance in 3-6 months.

Management Insights

  1. Q3FY26 marks a milestone in GMR Airports' transformation into a global, diversified, and profitable infrastructure platform.
  2. The company is well-positioned to capture future growth, focusing on traffic, aero, and non-aero revenue expansion.
  3. All major capex plans, including Bhogapuram, are largely complete, shifting focus to operational growth.
  4. Management is committed to improving ESG ratings and delivering world-class infrastructure.
  5. GAL is on track to be profitable in FY26 and aims to distribute dividends in the medium term.

Risk Factors

  1. Aviation sector faced disruptions in momentum, though passenger traffic showed resilience.
  2. Supply-side constraints and aircraft issues have flattened traffic growth in recent months.
  3. Geopolitical issues could impact future EBITDA growth, as noted by management.
  4. Regulatory decisions, such as the HRAB matter, are pending before the Supreme Court.

Good To Know

  1. Hyderabad Airport declared an interim dividend of INR7.5 per share, totaling INR2.1 billion for GAL's stake.
  2. Consolidated net debt (excluding FCCBs) increased by INR5 billion to INR345 billion, but interest costs are declining due to refinancing.
  3. Hyderabad Airport refinanced INR21 billion debt with NCDs, saving over 150 basis points in interest costs.
  4. GMR Cargo Logistics secured INR7.5 billion loan for Cargo City development at Delhi International Airport.
  5. A 0.5 million sq ft MRO facility for Safran was completed and inaugurated at Hyderabad Airport.

Key Drivers

  1. Strong traffic growth continues across airports.
  2. Non-aero revenue expansion drives profitability.
  3. Debt refinancing lowers interest costs significantly.
  4. New airport Bhogapuram operationalizes soon.

Key Analyst Discussions

Market Trends & Consumer Behavior

  1. Traffic growth, though benign recently due to aircraft supply issues, is improving since December.
  2. Approximately 50 net aircraft additions are expected for Indian airlines next year, boosting traffic.
  3. Management confirmed strong global demand resilience and India's position as a key growth market.

Financial Highlights

  1. Management expects debt to peak this fiscal year and decline from FY27, aided by non-aero growth.
  2. Interest costs are projected to reduce further in FY27 due to ongoing refinancing efforts at Delhi and GAL.
  3. An EBITDA base of INR1,800 crores is considered reasonable, with expectations for better growth momentum.
  4. Dividend distribution is anticipated when net debt multiple reaches 3-3.5x, possibly in FY28/FY29.

Product Composition

  1. Non-aero businesses are targeted for 15%+ long-term growth, driven by terminal expansions and new store openings.
  2. Delhi duty-free operations, now direct, show steady 6-8% quarter-on-quarter growth with no one-off events.
  3. Hyderabad's non-aero revenue growth is attributed to terminal revamp and new F&B/retail outlets.

Strategic Considerations

  1. Real estate asset monetization is not planned for the next 12-18 months, awaiting rent stabilization.
  2. Hyderabad Airport's large-scale expansion, costing INR12,000-INR13,000 crores, is slated to begin in FY28.
  3. No significant capex is expected for other airports in the next 12-18 months, post-Bhogapuram completion.
  4. The company is actively interested in greenfield airport projects like Chennai and Pune for future growth.