Kolte Patil Developers - Right time, ride time? - Karvy

Over last 3M Kolte Patil (KPDL) has outperformed CNX Realty index by 15% still the stock trades at 23.4% discount to its average cross-cycle multiple. With new approvals of ~7mn sqft standing at horizon we believe KPDL is looking at FY15-16E high-rise. We roll forward our valuation estimates to FY15E end and incorporate some new projects into our model. We maintain our BUY stance with increased NAV of Rs160/share.

Fat approvals pipeline lends – visibility to FY15-16E launches KPDL has projects encompassing ~1.1mn sqft saleable area in final Environmental Clearance (EC) approval phase (expected by 4QFY14E). Besides ~5.1mn sqft of EC approvals are expected by 1QFY15E. KPDL has been awaiting new approval since past Jul-13 and these projects are now in the final EC appraisal leg. With limited on hand inventory of ~1.5mn sqft, KPDL is awaiting EC clearances for next leg of growth.

New Townships, Mumbai foray - may add upto Rs79/share optional value

We expect new Township & Mumbai foray to add about Rs79/share optional upside to our NAV estimate. The Sanjivani Township project with ~15mn sqft saleable area has been certified as 'Green building' and is currently being evaluated for EC (can add about Rs21/share to SOTP). Increase in FSI in township may add Rs44/share and Mumbai foray may add Rs15/share to SOTP.

Strengthening management bandwidth, improving transparency

KPDL has taken multiple initiaives to improve productivity (i) tied up with IBM to automate operations and improve margins (ii) hired laterals & freshers from A-Grade professional schools to increase management bandwidth & (iii) changed auditors to Deliotte Haskins to improve transparency. Besides an investor friendly dividend policy is already in place. This is a part of overall strategy to be a market leader in Pune and gain traction in newer markets.

Maintain BUY: NAV increased to Rs160/share

We maintain our BUY stance on KPDL with an increased SOTP-based target price of Rs160/share (previous target Rs140/share). Our valuation is based on 0.9x our end-FY15E NAV forecast. We have marginally cut our headline numbers to factor in lagged launches. At CMP the KPDL trades at 4.1xFY16E EPS and offers ~4.8% dividend yield. Key triggers: (i) success of new launches (ii) faster pace of project approvals (~7mn sqft).

Source : Equity Bulls

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