GMR Airports have 20% upside, BofA predicts citing four catalysts

Shares of GMR Airports Ltd. are expected to see as much as 20% upside from the current levels, according to brokerage firm BOFA Securities, which initiated coverage on the stock on Tuesday, December 2.

BOFA Securities has started coverage with a 'Buy' rating and also assigned a price target of ₹128 per share on the counter.

The brokerage said that GMR Airports is well-positioned for strong earnings growth, supported by rising travel demand in India, a steady ramp-up in non-aero and real-estate revenues, and favourable legal outcomes.

BOFA Sec considers the stock's valuation, at 15x adjusted EV/EBITDA (Enterprise Value to Earnings Before Interest, Tax, Depreciation and Amortisation), attractive given the company's growth outlook.

The brokerage highlighted several potential catalysts: upward revisions to consensus estimates (with BOFA's EBITDA estimates 10% higher), reopening of Pakistan's airspace, regulatory clarity on the hypothetical RAB (regulated asset base) decision, continued execution on non-aero and real-estate plans, and the eventual start of dividends.

Key risks, as per the brokerage, include possible near-term traffic disruption once Delhi's second airport becomes operational, tighter regulatory actions in upcoming resets, geopolitical uncertainties that may impact Delhi-bound flights, and a still-elevated balance sheet.

Of the six analysts that have coverage on GMR Airports, five of them have a 'Buy' rating, while one has a 'Hold' recommendation on the stock.

Shares of GMR Airports Ltd. ended 0.63% lower in Monday's trade at ₹107.67 apiece. The stock has climbed 15% in the last one month and has risen 37% on a year-to-date basis.