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Research
Unitech - 4QFY12 Results Update - Motilal Oswal
Posted On : 2012-05-17 11:21:34( TIMEZONE : IST )
Cost overrun dents margin; liquidity challenges to persist in near-term; valuation attractive; maintain Buy with revised target price of INR30
- Unitech (UT)'s 4QFY12 numbers has been impacted by severe cost overrun (prior period adjustment done in 4QFY12). Core real estate EBIT margin was 17% as against 27-30% in 9MFY12. MTM loss provisioning relating to dollar-linked investment further impacted profitability.
- Revenue for the quarter declined 32% YoY to IN R7.2b, which is higher than our estimate of INR6b. However, EBITDA declined by a steep 77% YoY to INR389m, much below our estimate of INR1.12b. EBITDA margin was 5.4%. PAT declined 97% YoY to INR33m, also due to higher effective tax rate.
- For the full year, Revenue, EBITDA and PAT declined 23%, 57% and 56%, respectively. New launches declined in line with the company's strategy guidance of focusing more on clearing execution backlog. Sales during the year were 7.2msf/INR38b (ahead of estimate of INR36b), led by Noida projects, v/s 9.2msf/INR43b in FY11.
- During 4QFY12, UT managed to re-finance the balance ~INR5b of repayment need of FY12. This has led to temporary respite and we see the impact in the form of a sequential improvement of ~33% in revenue booking from real estate projects. While the management has hinted at strong execution ramp-up in FY13, we believe the ability to manage liquidity would be the most crucial factor, especially given that the company has higher repayment (>INR10b) scheduled for FY13.
- We expect near-term outlook to remain challenging due to liquidity headwinds adversely impacting execution ramp-up and cash conversion cycle. We downgrade our NAV estimate by ~20% to INR40/share and cut our target price by ~30% to INR30 (~30% discount to NAV) to align valuations to earnings growth outlook (implying FY13 EBITDA multiple of 20.5x - the past one years' median multiple).
- Nonetheless, we maintain our Buy recommendation due to steep valuation discount. The stock trades at ~ 50% discounts to our revised NAV, 15.5x FY13E EBITDA (lower end of historical band) and 14x FY13E EPS. We believe its land bank (BV of ~INR110b) offers strong support at INR19-20, limiting downside.
