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Research
Unitech - 1QFY14 Results Update - Motilal Oswal
Posted On : 2013-08-18 02:04:15( TIMEZONE : IST )
1QFY14 results disappoint
- Revenue grew 40% YoY (down 32% QoQ) to INR5.7b (v/s estimate of INR7b). The sequential decline is du to no incremental threshold crossing by any fresh project. EBITDA was INR752m (v/s estimate of INR1b); EBITDA margin was 13.1% (v/s our estimate of 15%). PAT grew 69% YoY to INR629m (v/s our estimate of INR842m).
- Reasons for the weaker EBITDA margin are: (1) higher revenue from Transmission Tower business (margins of 8-10%), (2) unfavorable project mix impacting the core Real Estate margins, and (3) muted margins in Hospitality business (recently commenced Hotel Country Inn, Gurgaon is operating at low occupancy).
- EBIT margin in core Real Estate business declined to 11.5% (v/s 19% in FY13) due to revenue mix favoring older projects (negative margins v/s ~25% for new projects). While we have been expecting gradual decline in revenue / loss booking in older projects, the persistence of weak margins is disappointing.
Cutting estimates; maintain Buy
- New launches declined further, with just 0.3msf fresh offering in Gurgaon in 1QFY14 (v/s 4msf/7.8msf in FY13/12), leading to dip in presales to 0.7msf (INR4.5b) v/s INR1.1msf (INR5.9b) in 4QFY13 and 1.5msf (INR7b) in 1QFY13. NCR accounted for 80%+ of presales. We are cutting our presales estimates for FY14/15 by 25-30% to INR21b/INR26b, given the lower visibility of new launches in the immediate future and deterioration in NCR market demand.
- Collection run-rate has been steady QoQ at INR6b in 1QFY14, against construction spending of ~INR3.2b, implying no major sequential improvement. Net debt went up by INR3.5b to INR59.9b (0.52x) on negative FCFE.
- We remain cautious over the quality of loans and advances in UT's balance sheet, subdued incremental presales, and weaker than expected scale-up in execution. We downgrade our FY14/15 earnings estimates by 14-15% on lower presales and slower than expected execution ramp-up. The stock trades at 0.3x FY15E BV and 10.3x FY15E EPS. Buy with a target price of INR28.
