Maintain BUY on Brigade Enterprises - Pick-up in leasing a key trigger - HDFC Securities

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

BRGD reported operationally strong quarter as pre-sales volume (0.99msf, -1% YoY) recovered to pre-COVID level. Sales value grew to Rs 5.8bn (+9% YoY), as realization grew by 10%. While leasing activity remained tepid, rental collection from existing portfolio continued to be healthy at 99% in 2QFY21. Footfalls at retail malls have improved to 30-35%. Four of the eight hospitality assets achieved gross operating breakeven at the end of October. Collections came in at Rs 5.4bn (vs 3.8bn in 1QFY21). Consolidated net debt increased to Rs 29.9bn (BRGD's share) from Rs 28.7bn at Jun 20-end. Despite mid-term challenges in hospitality and retail business, we roll forward our NAV to Dec- 21, maintain BUY with an increased target price of Rs 225/sh (vs Rs 213/sh earlier). Lease tie-ups in BTG Bengaluru will lead to further rerating.

Revenue misses estimates: BRGD reported revenue at Rs 3.1bn, a decline of 58% YoY and a miss of 26% on our estimates, as revenue from residential and hospitality business fell by 62% and 78% YoY respectively. However, revenue from lease rental segment declined less severely on steady collections from the commercial portfolio. EBITDA declined by 54% YoY. Consequently, BRGD posted a loss of Rs 171mn against our estimated loss of Rs 131mn. With improving labour availability, increasing occupancy in hotels and rising footfalls at malls, we expect revenue to recover in 2HFY21.

Residential sales at pre-COVID level; commercial rent collection at ~99%: BRGD registered pre-sales of 0.99msf (1msf in 2QFY20) as booking activity picked up. The company expects sales momentum to continue, as witnessed in Oct-20. Buyers continue to prefer completed and larger homes. However, the proportion of NRI buyers reduced compared to the previous quarter. Rent collections from office space remained healthy at 99% in the quarter. However, new leasing remained tepid at 0.04msf as tenants deferred decision. Basis management commentary, ~1.4msf of commercial space in BTG is at advance stage of closure and is expected to be closed by FY21-end.

Balance sheet remains stable with strong liquidity: Consolidated net debt increased at Rs 38.3bn (vs Rs 36.2bn on Jun-20), of which Rs 21bn is LRD/GOP securitised debt. With Rs 5.1bn of cash, net D/E stood at 1.27x. Collections improved to Rs 5.4bn during the quarter from Rs 3.8bn in 1QFY21 as collections from residential segment increased to Rs 4bn (vs Rs 2.8bn in 1QFY21). The company generated positive operating cash flow of Rs 1bn during 1HFY21. Outlay towards land acquisition stood at Rs 1.7bn, as Brigade bought a land parcel for Utopia Phase-2. BRGD expects rents from BTG Bengaluru and WTC Chennai to commence by Mar 21-end, which would improve the cash flow of the company.

Shares of BRIGADE ENTERPRISES LTD. was last trading in BSE at Rs.217.45 as compared to the previous close of Rs. 203.95. The total number of shares traded during the day was 22911 in over 1307 trades.

The stock hit an intraday high of Rs. 220 and intraday low of 207. The net turnover during the day was Rs. 4940462.

Source : Equity Bulls

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