Broker’s call: GMR Airport (Hold)

GMR Airport has obtained a new tariff order for its Hyderabad airport, which accounts for 27% of its overall airport traffic. This order provides clarity on aero tariffs for the next five years, from FY27 to FY31. The new tariff order has accepted a yield per passenger of ₹426, slightly lower than the prior control period. It has also permitted a differential aero tariff for the same period.

The new tariff order has resulted in an estimate that aero charges per passenger in FY27E will remain similar to those in FY26. The flat tariff is lower than initial expectations of an increase during the new control period. Moreover, the aero tariffs do not account for the capital expenditures expected to be incurred during this period. It's worth noting that aero charges include landing charges, parking charges, user development fees, and cargo handling.

With embarking and disembarking user development fees now levied and VTP tying incentives to traffic growth, revenue growth is contingent on passenger traffic. The analyst maintains a Hold rating with an unchanged target price of ₹99. Upside risks include improved duty-free sales at Delhi and Hyderabad airports and improved non-aero revenue across the airport portfolio.

Potential downside risks involve muted traffic growth, delays in improving non-aero revenue, and increased competition for Delhi Airport from Jewar Airport in Noida (Uttar Pradesh). All comments must be in English and in full sentences, without being abusive or personal.