DB Realty - Q2FY13 Result Update - Kantilal Chhaganlal

- In Q2FY13, DB Realty Ltd (DBRL) reported consolidated revenue of Rs.527.5 mn, registering a significant decline of 68.4% on Y-o-Y basis and by 37.9% on sequential basis. The decline in revenue mainly due to slowdown in sales, increasing interest rates, delayed approvals coupled with an increase in input cost during last three quarters. For H1FY13, DBRL reported a consolidated BSE Code 533160 revenue of Rs.1376 7 mn which was substantially down by 1376.7 mn, 64.5% on Y-o-Y basis. The difficult macro-economic environment also had significant impact on profits of the company.

- In Q2FY13, DBRL registered a consolidated EBITDA of Rs.47.8 mn which declined by 66.1% on Y-o-Y basis. During the quarter, DBRL's EBITDA margin stood at 9.1% against 8.4% in Q2FY12. However in H1FY13, the company reported operating profit of Rs.122.5 mn against the operating loss of Rs.186.4 mn in H1FY12 (mainly on account of delay in projects which led to sharp increase in operating cost).

- DBRL's consolidated net profit in Q2FY13 stood at Rs.96.8 mn with net profit margin of 18.4% Vs. 7.9% in Q2FY12. For H1FY13, the consolidated net profit margin stood 5.5% Vs. 14.0% in same period previous year.

- As per the management update, DBRL's DB Woods, Goregaon and Orchid suburbia, Kandivali are expected to be completed by March 2013. The management has also mentioned that, all other DB Realty projects are on schedule and the company remain committed to completion and delivery of its projects within stipulated time frames. The company expects an uptake in next six months in project executions and sale.

- During the quarter, the company has appointed new CEO Mr. Vipul Bansal and is planning to streamline the management team to get faster execution of projects and key decisions. DBRL is looking to launch 10 new projects in Mumbai and completion of two ongoing project in next 6 months. The company is also planning to leverage 36 prime land plots which it own in Mumbai City. As per the sources, DBRL is also in the process of re-branding 7 of its 'Orchid' projects to have better brand recall.

Valuation: At CMP of Rs.128.0, the stock is trading at significant discount compared to other peers in the industry. We revise DBRL's price target to Rs.174/ share (which is at 15% discount to our FY14E calculated NAV, factoring the project & approval delays) with 'BUY' rating on DBRL (from earlier 'cautious').

Risks: slowdown in DBRL's sales, project execution delays in residential projects and adverse real estate market conditions, Corporate governance practices.

Source : Equity Bulls

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