Kotak Institutional Equities said it is positive on GMR Infra with a buy rating on the stock and a target price of Rs 48 as the company is seeing improvement in average transaction value (ATV) and retail spending compared to the pre-COVID levels.

The stock, which fell more than 20 percent this year, is seeing a sharp recovery as passenger volume at Delhi and Hyderabad airports increases. According to Kotak, the Hyderabad Airport, owned by GMR Group, is one of the leading Indian airports witnessing a sharp domestic passenger recovery.

The stock gained more than 2 percent to Rs 37.95 per share on Tuesday. As per the current price, Kotak expects a 26 percent upside in the stock to Rs 48 in medium to long term.

"GMRI’s airports in Delhi and Hyderabad have seen a faster recovery in domestic volumes versus their counterparts. The recovery rate or ratio of March 2022 domestic passenger volumes to February 2022 pre-COVID levels is higher at 91-92 percent for GMRI’s airports versus 84-85 percent for Mumbai and Bengaluru airports. This is again a testament to the active role an airport operator can play in planning routes with airlines and adding new destinations. Hyderabad airport has added 16 domestic and four overseas destinations during COVID times," said Kotak.

"Our recent visit to GMRI’s Hyderabad airport suggests a meaningful improvement in average transaction value (ATV) in retail for domestic passengers. On March 22 basis, ATV has improved to close to 140 percent of pre-COVID levels... The spending intensity per unit for retail has accordingly improved to close to 120 percent of pre-COVID levels and would have improved even more in recent times as domestic passenger count has recovered to pre-COVID levels," it added.

According to Kotak, changing passenger habits -- of avoiding a trip to a mall during COVID times and instead shopping at an airport ahead of journey -- played a crucial role in the improvement in ATV.

First Published:Apr 26, 2022 3:44 PM IST