Kolte Patil Developers - Expectation galore - Karvy

After a robust FY13 results with profits crossing Rs1bn (3x FY12 Profits) mark there are huge expectations building up on Kolte Patil Developer Ltd (KPDL) to deliver in FY14E. We see fresh triggers playing out in FY14 with (i) 2.5-3mnsqft of new sales booking (~ Rs14bn in value terms) (ii) New Approvals of 5-6mn sqft (iii) further strengthening in corporate governance, balance sheet & (iv) strong earnings growth. We expect stock performance to build upon better FY14E and maintain our BUY stance and value KPDL on NAV based target of Rs180 (giving a 10% NAV discount) offering an 80% upside from current levels.

Robust 4QFY13 - promising FY14E

During 4QFY13 KPDL delivered a robust growth numbers with Revenue, EBIDTA & PAT growing 133%, 159% & 237% YoY. EBIDTA margins expansion of 320bps helped this growth. KPDL recorded 0.44mn sqft of new sales at Rs4,864/sqft realization. For full year FY13, KPDL recorded a 2.6mn sqft new sale and realization increased 24.5% YoY to Rs4,808/sqft, more than offsetting volume drop of 8.7% YoY. For FY14e, KPDL has guided for 2.5- 3mn sqft new sales (~Rs14bn in value) laying strong foundation for FY14-15E. The current unexecuted revenue order book stands at Rs13bn.

Strong balance sheet - not pricing in premium valuation

Despite a strong balance sheet Net D/E-0.1x (Bank debt - Rs1bn, Net debt Rs611mn, Consolidated debt- Rs1.73bn, Cash- Rs1.1bn, Net worth - Rs7.2bn, Rs548mn reduction in debt YoY), valuation are undemanding at 4.8x FY15EPS. KPDL has a very conservative approach to debt which reflects in strong private equity partnership with ICICI Venture, IL&FS & Portman Holdings. Besides KPDL's new land acquisition have been largely JDA's.

Focus on strengthening corporate governance, sharing profits

We see major corporate governance improvement with changes in few SPVs Internal Auditors to Big-4 and we believe that with growing size the company may need to change its own internal/statutory auditors as well.

Maintain our BUY stance: NAV Target of Rs180

We value KPDL on NAV based target of Rs180 (giving a 10% NAV discount). At CMP the KPDL trades at 4.7xFY15E EPS.

Source : Equity Bulls

Keywords