Expansions At Almaty, Ankara, And Delhi Airports Will Enhance Capacity And Passenger Services

Key Takeaways

• Expansion through international assets and terminal projects aims to boost capacity, traffic, and future revenue.
  
• Successful retail strategies and sustainability initiatives focus on increasing earnings, improving margins, and supporting long-term growth.
  
• Geopolitical risks, regulatory challenges, and rising costs may strain profitability and limit financial flexibility, affecting long-term growth and sustainability for Aeroports de Paris.

Catalysts

Owns and operates airports worldwide.

• Expansion in international assets, particularly through TAV Airport and GMR Airport, is expected to support continued growth. Projects such as new terminals and expansions in key locations like Almaty, Ankara, and Delhi are anticipated to increase capacity and traffic, positively impacting future revenue.
  
• Record spend per pax and strong retail performance, particularly at flagship terminals, indicate potential for future revenue growth from retail and services. Initiatives like deploying exclusive private terminals and time-exclusive offerings aim to attract high-end passengers and increase earnings.
  
• Sustainability initiatives, including green energy projects and decarbonization efforts, may lead to long-term efficiencies and cost reductions, potentially improving net margins and earnings. Achievements such as Level 5 airport carbon accreditation at Delhi Airport underline ADP's commitment to environmental goals.
  
• The Paris airports' successful operational management during large events, such as the Paris games, showcases operational excellence and technology integration which should enhance customer experience and boost traffic, supporting revenue growth.
  
• Upcoming investment strategies, including partnerships and economic regulation contracts, aim to reinforce economic models, and secure regulated returns, driving value creation and positively impacting earnings and revenue stability in the Parisian segment.

Aeroports de Paris Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Aeroports de Paris's revenue will grow by 4.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.6% today to 10.9% in 3 years time.
• Analysts expect earnings to reach €756.9 million (and earnings per share of €7.65) by about February 2028, up from €342.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €835 million in earnings, and the most bearish expecting €651.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.9x on those 2028 earnings, down from 29.7x today. This future PE is lower than the current PE for the GB Infrastructure industry at 25.1x.
• Analysts expect the number of shares outstanding to grow by 0.82% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.1%, as per the Simply Wall St company report.

Aeroports de Paris Future Earnings Per Share Growth

Risks

• Risks associated with geopolitical instability, such as the situation in Jordan, could lead to decreased traffic and revenue, potentially impacting earnings from international operations.
  
• The infrastructure tax in France and expected surcharges in 2025 may continue to strain net margins and financial results, impacting the company's ability to grow earnings despite increased revenues.
  
• High inflation in countries like Turkey affecting operating expenses and staff costs could reduce profit margins for international operations such as TAV Airports.
  
• Regulatory uncertainty and challenges in negotiating a new economic regulation agreement may impact the ability to generate sufficient returns on significant future capital expenditures, thereby affecting net margins and long-term profitability.
  
• The pressure to maintain dividend payouts amidst high debt levels and substantial investment needs may limit financial flexibility, impacting long-term cash flow sustainability.

Valuation

• The analysts have a consensus price target of €130.765 for Aeroports de Paris based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €150.0, and the most bearish reporting a price target of just €104.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €6.9 billion, earnings will come to €756.9 million, and it would be trading on a PE ratio of 23.9x, assuming you use a discount rate of 11.1%.
  
• Given the current share price of €102.7, the analyst price target of €130.76 is 21.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.