Maintain BUY on Brigade Enterprises - Muted performance - HDFC Securities

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

BRGD reported 1QFY21 pre-sales volume/value at 0.42mn sqft/Rs 2.5bn, registering decline of 63%/58% YoY. While leasing activity was conspicuous by its absence, rental collection from existing portfolio remained healthy at 98% in 1QFY21. The company has given 50% waiver on MG during the lockdown for the retailers who have reopened at the mall. BRGD has started operations at hospitality assets and hopes to achieve gross operating breakeven by 2QFY21. Collection of Rs 3.8bn led to positive operating cashflow of Rs 820mn. Net debt also remained stable at Rs 29bn (Rs 28bn at FY20-end, BRGD's share). Despite midterm challenges in hospitality and retail business, we maintain BUY with target price of Rs 213/sh as BRGD has strong liquidity. Lease tie-up in BTG Bengaluru will lead to further re-rating.

Revenue misses estimates: Revenue (Rs 2bn) for the quarter declined by 71%/68% YoY/QoQ as revenue from residential and hospitality business declined by 78% and 86% YoY respectively. Despite reducing overhead expenses by 54%, EBITDA declined by 74%/65% YoY/QoQ. Consequently, BRGD posted a loss of Rs 527mn against our estimated loss of Rs 501mn. Labour availability has improved from 30%, post ease of restriction, to 50% currently. Management expects it to normalize by 3QFY21, which would help book better revenue from the residential segment.

Residential sales at 0.4mn sqft; commercial rent collection at +98%: BRGD registered pre-sales of 0.4mn sqft (~40% of 1QFY20) as booking activity picked up from 15% in April to 65% in June. The company expects sales to improve further as it has strengthened its digital channels. Management also highlighted three trends which, we believe, will continue in the medium term: (1) preference for completed homes, (2) higher interest from NRI buyers and, (3) demand for larger space. Despite the lockdown, rent collection from office space remained healthy at +98% in the quarter. However, new leasing was mostly absent. BRGD launched two new projects, one each in residential (0.62mn sqft) and office (1.3mn sqft).

Balance sheet remains stable with strong liquidity: Collection of Rs 3.8bn during the quarter was largely from residential (Rs 2.8bn) and office (Rs 0.8bn) segments. Consolidated net debt stood at Rs 36.2bn (vs Rs 35.2bn on Mar'20), of which Rs 19bn is LRD/GOP securitized debt. With rents from BTG Bengaluru and WTC Chennai commencing by Jan-21, BRGD has headroom to raise additional Rs 22bn in LRD. With Rs 4.6bn of cash, net D/E stood at 1.23x. BRGD has opted for loan moratorium for its hospitality and retail assets (Rs 12bn), which are facing significant headwinds.

Shares of BRIGADE ENTERPRISES LTD. was last trading in BSE at Rs.149.35 as compared to the previous close of Rs. 148.3. The total number of shares traded during the day was 35049 in over 1447 trades.

The stock hit an intraday high of Rs. 153.55 and intraday low of 146. The net turnover during the day was Rs. 5291720.

Source : Equity Bulls

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