Brigade Enterprises - Record quarter for residential sales - ICICI Securities

Q3FY21 saw Brigade Enterprises' (BRGD) clocking its best ever residential volumes of 1.53msf worth Rs9.2bn (up 53% YoY in value terms) driven by strong uptick in sales from its new project launch in Hyderabad. While incremental office leasing was minimal along with continued pressure seen in malls and hotels, business outlook in these segments is improving every quarter. With peak capex behind and gradual improvement expected from H1FY22, we remain bullish on the company's long-term prospects. We expect BRGD's share of rental NOI to grow at 12% CAGR over FY20-23E to Rs5.2bn driven by pre-leasing in Chennai/Bengaluru office projects. We reiterate our BUY rating with a revised Mar-22 NAV based target price of Rs346/share (earlier Rs272/share) factoring in new residential projects and lower cap rate assumption of 8% (earlier 9%) for annuity assets.

- Record quarter for residential sales: While Q2FY21 saw sales bookings bouncing back to pre-Covid levels of 1msf worth Rs5.8bn, Q3FY21 saw BRGD clock its highest ever quarterly sales bookings of 1.53msf worth Rs9.2bn (up 42% YoY in volume terms and up 53% in value terms). This was driven by the launch of Brigade Citadel project in Hyderabad which contributed Rs3.3bn of sales bookings with balance sales from ongoing projects. As per the company, sales momentum has sustained in January 2021 as well. As a result, we have built in sales bookings of 4.1msf in FY21E (flat YoY) and 5.0msf each in FY22/23E on the back of a strong launch pipeline across mid-income projects in Bengaluru, Hyderabad and Chennai.

- Robust office rental collections, incremental leasing remains key: BRGD achieved Q3FY21 office rental collections of 99%. The focus remains on incremental leasing with WTC Chennai rentals expected to commence from Q1FY22 (2msf of which over 80% is leased) and Tech Gardens, Bengaluru (3msf of which ~42% is leased). As per company, ~1msf of fresh leasing discussions are in the advanced stage of which ~0.25msf may be closed in Q4FY21 with balance leasing expected to pick up from H1FY22. Mall consumption is back to 70% of pre-Covid levels and company expects mall rentals to revert back to pre-Covid levels from Q1FY22 onwards. The hotel segment saw Q3FY21 occupancy rising by 1,200bps QoQ to 27% resulting in positive EBITDA of Rs41mn after EBITDA losses of Rs65mn in Q2FY21 and Rs119mn in Q1FY21. With opening of banqueting/F&B offerings in hotels and domestic travel, hotel occupancies now range between 40-50% from January 2021.

- Residential debt decreases QoQ on robust sales and collections: BRGD's Q3FY21 residential collections rose 29% QoQ to Rs5.2bn leading to Rs2.5bn of operating surplus which was offset by capex of Rs1.4bn and interest payment of Rs1.0bn. Overall, BRGD's share of net debt reduced marginally by Rs0.4bn QoQ to Rs29.5bn with residential segment debt reducing by Rs1.4bn QoQ to Rs6.1bn.

Shares of BRIGADE ENTERPRISES LTD. was last trading in BSE at Rs.285 as compared to the previous close of Rs. 270.2. The total number of shares traded during the day was 32891 in over 1002 trades.

The stock hit an intraday high of Rs. 292.15 and intraday low of 270. The net turnover during the day was Rs. 9351558.

Source : Equity Bulls

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