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Research
Godrej Properties - 1QFY2014 Result Update - Motilal Oswal
Posted On : 2013-07-31 10:53:48( TIMEZONE : IST )
One-off other income drives PAT: Revenue declined 11% YoY and 35% QoQ to INR2b, EBITDA grew 0.6% YoY but declined 59% QoQ to INR406b, and PAT grew 130% YoY but declined 26% QoQ to INR395m. PAT growth was driven by surge in other income, which includes one-off inflow of INR400m due to 49% stake sale in Sahakar Nagar II to APG-led co-investment platform. Key revenue contributors: (1) Godrej One (30%), (2) Prakriti, Kolkata (14%), (3) GGC, Ahmedabad (29%), and (4) Frontier, Gurgaon (12%). In 1QFY14, GGC Phase III C (B) and Horizon (Pune) crossed revenue recognition threshold.
Operating margins contracted sequentially: EBITDA margin expanded 2.3% YoY but shrank declined 11.5% QoQ to 20.1%. Assuming EBITDA margin of commercial project, Godrej One (Vikhroli, Mumbai) at ~40%, core EBITDA margin at other projects contracted 12% QoQ to ~12%. Higher proportion of revenues from low margin Garden City, Ahmedabad (GGC) project and cost escalations across joint-development projects impacted margins.
BKC commercial posted encouraging response: New phases of GCC (Ahmedabad), Prakriti (Kolkata) and Summit (Gurgaon) were the key launches in 1QFY14. Adjusting for JV partners' stake and DM fees, we calculate GPL's 1QFY14 presales at 0.49msf (INR4.2b), flat YoY. Total presales grew 19% YoY to INR6b. The key positive in 1QFY14 was strong sales in BKC commercial, where it sold ~0.14msf (v/s 0.05msf in 4QFY13) at average realization of INR24k/sf. Against the management's target of 0.25msf annually; cumulative sales at BKC were 0.19msf.
FCFE negative; net debt up: Operating cash flow (OCF) merely broke even, while FCFE has been negative in 1QFY14, driven by cash outgo towards (a) deposits on recently acquired Okhla (Delhi) project, and (b) facilitating HDFC PE Fund's exit from Chennai and Chandigarh projects. We estimate negative FCFE of INR1.1b in 1QFY14, leading to increase in net debt to INR16.1b (1.1x). Cost of debt stood at 11.4% as against 11.7% in 4QFY13.
