Jefferies has started coverage at GMR airports with a target price of Rs 100, which represents an increase of over 15 percent from the current market price of Rs 86.92.

The New York-based global investment banking and financial services firm indicated that GMR Airports is transitioning from a utility to a retail consumption model and is expected to benefit from robust air traffic growth prospects, travel retail opportunities, an upward adjustment in airline fares, and unlocking real estate.

Jefferies noted that they valued GMR Airports at Rs 100 by valuing Airport Subs at 27x FY30 Ebitda, with a discount of 12 percent over four years. They expect the company to be PAT positive in FY26 and leverage ratios to be moderate, with net D/Ebitda expected to be 4-5x in FY26, compared to 10-12x in FY23/FY24e, as significant capital expenditure regarding DIAL/GHIAL now behind.

In addition, Jefferies said the continued simplification of the corporate structure, improvement in leverage ratios and support from major airport ADP would facilitate a revaluation. They forecast a compound annual growth rate (CAGR) of 32 percent in GMR's earnings before interest, taxes, depreciation and amortization (Ebitda) from fiscal year 2023-24 (FY24) to FY27e.

Jefferies described GMR as the largest private airport operator in India, which manages two of the busiest airports (Delhi/Hyderabad) and has a cumulative share of 27 percent of India's passenger traffic. They highlighted that the attractiveness of the airport sector is mainly driven by its monopolistic business model, strong prospects for air traffic growth in India, lucrative potential for travel retail and real estate monetization ability.

The company highlighted that GMR's airport operations in India have a mixed revenue profile of regulated aviation revenues, offering regulated returns on aviation operations and upside potential on non-regulated revenues, including revenues from non-aeronautical operations and commercial real estate.