Maintain BUY on Kolte Patil Developers - Valuation affordable - HDFC Securities

Mr. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities.

Kolte Patil Developers (Q4FY20): Valuation affordable. Maintain BUY(TP Rs 240, CMP Rs 162, MCap Rs 12bn)

KPDL reported operationally strong 4QFY20 with pre-sales of 0.67mn sqft (6% YoY) on continued strong response to Life Republic project in Pune (34% of pre-sales). Total pre-sales for FY20 were at 2.5mn sqft in-line with management guidance of 2.5-2.7mn sqft. 4QFY20 collections remained healthy at Rs 3.8bn, rising 12% YoY. For the year FY20, collection stood at ~Rs 14bn (+9.7% YoY), highest ever in KPDL history. We maintain BUY on KPDL as it has a) comfortable liquidity position (FY20- Rs 2.6bn FCF, Net D/E 0.35x) b) strong affordable residential project mix (at average
POCM nos beat our estimates: In order to maintain continuity, KPDL also report key financials under POCM. On like to like basis, revenue came in at Rs 2.8bn (-26% YoY, 36% beat), EBITDA at Rs 553mn (-46% YoY, 42% beat) and APAT at Rs 312mn (-32.1% YoY, ~3x our estimates).

Construction activity started; leveraging digital channels for sales: KPDL has started construction activity at some of the key sites in Pune and Bengaluru since early May-20. Labor availability is at 40% and KPDL expects it to reach 70% by Sept/Oct-20. Given that most of its projects are in areas which are worst affected by pandemic, KPDL ramped up its digital presence and was able to sell 180 units till April' 20. KPDL has achieved 50-60% of its pre-sales run rate in last 30days through digital channels at the moment with good response from NRI customers. We expect 2mn sqft/Rs 11bn, FY20 presales volume/value and Rs 9.5bn collections.

Collections to further improve balance sheet position: Consolidated debt reduced to Rs 4.3bn (vs Rs 5.2bn on Dec'19). With ~Rs 1bn of cash, Net D/E stood at 0.35x, well within management guidance of 0.5x. Despite low leverage, company has taken moratorium on loan during April-June period to conserve cash. We expect liquidity position to improve further with proceeds from land monetization deal with Planet Smart City (Rs 910mn), collections for presales done up to FY20 (balance collections - Rs 13.5bn, construction cost of ~Rs 7.5bn, FCF pre tax Rs 6bn) and monetization of ready to move inventory (Rs 2.7bn).

FY21 launch pipeline strong: After no new launch in FY20, KPDL is planning to launch seven projects in FY21 across Mumbai and Pune with topline potential of Rs 31bn. Of the four projects planned for Pune, three will be commercial. Three projects planned in Mumbai are redevelopment projects and are for residential/retail.

Shares of KOLTE-PATIL DEVELOPERS LTD. was last trading in BSE at Rs.162 as compared to the previous close of Rs. 161.95. The total number of shares traded during the day was 12628 in over 375 trades.

The stock hit an intraday high of Rs. 168 and intraday low of 158.15. The net turnover during the day was Rs. 2054182.

Source : Equity Bulls

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