Dear Readers,
Is there anybody who feels that GMR Infra is overvalued relative to its current and future earnings. I am not able to decide because GMR Infra does not have long enough history to evaluate its past performance. I want to throw this question in public to see what some of the readers of this blog think.
I know it has lot of projects under construction and will be bidding for more projects in future but the fact is that it will also be draining lot of cash in servicing debts that have been raised to finance these projects. Infrastructure is the momentum sector now but then Information Technology (IT) was the hot sector in 2000 and look what has happened to all the IT bellweathers even though they are still growing at 15 - 20% annually. In the long run I believe stock price always reflects the true value of the business and GMR Infra's stock price may be currently way above the intrinsic value of it's business.
Does anybody shares this thought?
Regards,
Bargain Hunter
DISCLAIMER: I do not have any long or short positions in GMR Infrastructure
Wednesday, December 26, 2007
IS GMR Infra Overvalued ?
Posted by Bargain Hunter at 5:37 AM
Labels: ABB, BHEL, Great Wall, Infrastructure Bonds, NHAI, NHDP, Siemens
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3 comments:
I have no idea about this company, ask me about US stock
Not sure abt valuation . But this stock seems to be heading towards 300 as per many broker reports.
http://indstocks.blogspot.com
The stock price assumes a premium over cash flows of the entire projects pipeline and proposals. It does not consider execution risks. Currently the operating cashflow occurs from their take or Pay PPAs. Also one of their projects is mothballed for want of fuel. Once the PPAs expire by the middle of this year, the company will have to borrow money even for working capital requirements.
With a current free float of less than 5%, it is easy to hold on to the price. If the funds and promoters gradually dilute their holdings in the market on the back of good demand, the retail investor may be caught with an expensive stock
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