Prestige Estates Projects - Fundamental Call - Consortium

Prestige Estates' (Prestige) Q3FY13 earnings are impressive and ahead of expectations with revenue and EBITDA almost doubling QoQ to Rs4.9bn and Rs1.4bn respectively. The surprise has come on the back of improved execution, which has led to new projects (Sunnyside, Park view, Kingfisher Towers & Tranquillity), achieving the revenue recognition threshold. Unbilled revenues of Rs51bn will sustain earnings in the coming quarters and pickup in collections will aid cashflow (the company is aiming at consistently maintaining Rs5bn of revenue and cash collections every quarter).

Operating performance continued to impress with Rs7.5bn worth of sales booked during the quarter, resulting in 9MFY13 sales of Rs25.8bn against fullyear guidance of Rs25bn. Sales volume for the quarter reduced marginally QoQ to ~1.44mn sqft against ~1.6mn sqft in Q2FY13 and 2mn sqft in Q1FY13. Sales realisation for Q3FY13 remained flat at Rs5,076 against Rs5,037/sqft in Q2FY12. Prestige has achieved its full-year target of ~10mn sqft of launches in 9MFY13 itself and is working towards incremental launches in Q4FY13 as well.

We believe the company's strong sales in 9MFY13 was driven by aggressive launches that elicited strong response. However, we feel the company might find it challenging to replicate the same growth performance in the coming quarters. We believe 43% of unsold inventory could deter fresh launches in the coming quarters, which might lead to tapering down of sales momentum. Leasing volumes picked up during the quarter to 0.24mn sqft - we believe the company is on track to achieve Rs2.5bn exit rental for FY13. Though we remain positive on the increased sales momentum and commercial leasing visibility, we believe current valuations are pricing-in the positives and extrapolating the recent growth performance in the coming quarters. We shift our NAV to FY14E, thereby increasing the target price to Rs200/share. We assign ADD rating on the stock.

Source : Equity Bulls

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