Maintain ADD on Prestige Estates Projects - Capex cycle to gather pace - HDFC Securities

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

PEPL reported an operationally strong 3QFY21 with pre-sales of Rs20.2bn (+55% YoY, Prestige share - Rs 15.6bn, +44% YoY). Gross bookings came in at 3mn sq ft (+85% YoY). Collections were also healthy at Rs 14.3bn (+26% YoY, PEPL share Rs 11.3bn, +27% YoY). PEPL expects to maintain similar pre-sales momentum for 4QFY21 in residential segment with further ramp-up in new launches. On financial front, revenue/EBITDA/APAT beat/(miss) estimates by 3/(10)/(23)%. Net debt reduced marginally from Rs 86.7bn on Sep 20-end to Rs 84.6bn. Blackstone deal is in the final stages of closure. PEPL has embarked on a new asset Capex cycle in Bengaluru/Mumbai and, given the launches ramp- up by peers, it may see some saturation setting in on residential segment. We maintain ADD with SOTP-based target price unchanged at Rs 324/sh.

3QFY21 financial highlights: Revenue: Rs 18.5bn (3% beat). EBITDA: Rs 4.5bn (10% miss). Margins came in at 24.2% (vs estimate of 27.7%). Interest cost was Rs 2.4bn (in-line). Depreciation at Rs 1.4bn (vs est. of 1.6bn). Other income was higher at Rs 0.8bn on repeal of land acquisition compensation by the government. The share of loss from associates is at Rs 112mn while Minority Interest is at Rs 291mn. Consequently, RPAT came in at Rs 587mn, 23% miss.

3QFY21 operational highlights: Pre-sales (PG share): Rs 15.8bn (vs Rs 8.4bn QoQ). Collections (PG share): Rs 11.3bn (vs Rs 9.1bn QoQ). Rental Income (PG): Rs 2.1bn (vs Rs 2.2bn). Leased 0.02mn sq ft during 3QFY21. Launches: 3.15mn sq ft (vs 3.95mn sq ft QoQ). PEPL expects sales momentum to continue, given the strong pipeline of new launches.

Blackstone deal progressing well: Net debt stood at Rs 84.6bn (vs Rs 86.7bn QoQ) with net D/E at 1.47x (vs 1.5x QoQ). Average borrowing cost further reduced by 35bps QoQ to 9.3%. With proceeds from Blackstone deal, Prestige will enter in a new Capex cycle. PEPL has 63/37/7 mn sqft residential / commercial / retail projects, which are ongoing / under construction at the end of 3QFY21. While the company intends to be largely debt free in residential business, going forward, debt would be a function of new Capex on office/retail assets.

Shares of PRESTIGE ESTATES PROJECTS LTD. was last trading in BSE at Rs.289.75 as compared to the previous close of Rs. 286.6. The total number of shares traded during the day was 42625 in over 1473 trades.

The stock hit an intraday high of Rs. 292.15 and intraday low of 285.1. The net turnover during the day was Rs. 12339492.

Source : Equity Bulls

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