Prestige Estates Projects - Operations strong; pick-up in deliveries/rentals key - Religare

PEPL posted steady sales in Q3FY14 (1.5msf/Rs 9.4bn) aided by the big launch (Lakeside Habitat) in Bengaluru. This along with collections/leases of Rs 5.9bn/~0.7msf mean that the company remains comfortably placed vis-à-vis its full-year guidance. We however expect launches to moderate as the focus shifts to inventory liquidation and execution. Thus, a pick-up in deliveries and an improvement in the rental portfolio should be the key performance indicators for PEPL from here on. Maintain BUY.

New sales remain buoyant: PEPL reported pre-sales of 1.55msf/Rs 9.4bn helped by the launch of Lakeside Habitat in Bengaluru. As of Dec'13, PEPL has achieved 82% of its annual sales target. Management suggests a moderation in new launches for a few quarters, which should mean a corresponding moderation in volumes.

Collections remain steady: Customer advances came in at Rs 5.9bn, thus meeting 79% of its annual collection target of Rs 23bn. Management indicated that the QoQ decline in customer advances was normal, and the number should pick up again in Q4FY14. We also expect customer advances to improve through FY15 as new sales start contributing.

P/L numbers to remain flat: While construction activity across projects remains on track, the P/L numbers may not improve significantly in the absence of big projects hitting the revenue-recognition threshold. We estimate Q3FY14 revenue/PAT at Rs 4.7bn/Rs 0.8bn (-2%/+1% QoQ), and as per management, these numbers should improve in Q4 led by the first-time revenue recognition from some projects.

Maintain BUY: PEPL has improved its scale of business, which is reflected in its sales/launches. We however expect launches to moderate for the next few quarters and hence see limited near-term volume growth potential. Thus, a pick-up in deliveries/an improvement in the rental portfolio remain key growth triggers. BUY.

Source : Equity Bulls

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