Prestige Estates Projects - Residential sales see strong uptick - ICICI Securities

Q3FY21 saw Prestige Estates Projects' (PEPL) gross residential bookings rising 55% YoY in value terms to Rs20.3bn on the back of strong response to new launches in Hyderabad and Chennai and monetisation of completed inventory across projects. With a strong pipeline of launches in CY21, this momentum in residential sales is expected to sustain. However, the key monitorable going ahead is the consummation of the deal with the Blackstone Group wherein PEPL has recently signed a Term Sheet for sale of PEPL's stakes in specific office, retail, hotel and /facilities management SPVs for Rs91.6bn. PEPL currently has Rs53.7bn of debt in operational annuity assets and it may redeploy the surplus cash of Rs37.9bn for fresh capex if the deal goes through. We retain our ADD rating with a revised DCF based target price of Rs311/share (earlier Rs291) as we build in higher residential sales over FY22-25E. Key risks to our call are a slowdown in residential demand and continued weakness in office leasing.

- Residential sales see strong recovery: PEPL reported gross sales bookings of Rs20.3bn in Q3FY21 (PEPL share at Rs15.8bn) which was up 55% YoY in value terms led by strong response to new launches in Hyderabad (Tranquil) and Chennai (Windsor Park) which contributed to over 30% of the quarter's sales value along with monetisation of completed inventory. As result, gross collections for the quarter were also up 26% YoY to Rs14.3bn (PEPL share at Rs11.3bn). Owing to strong collections, PEPL's consolidated net debt reduced by Rs2.0bn QoQ to Rs84.6bn. PEPL clocked rental income of Rs2.2bn for the quarter (Rs6.2bn in 9MFY21) while the hotel business saw EBITDA losses narrowing to just Rs6mn for the quarter.

- Strong residential launch pipeline for CY21: As per PEPL management, there is a large pipeline of residential launches lined up over the next couple of quarters across South India (Prestige Smart City), Noida (NCR) and Mumbai (Jasdan Classic project). While Q4FY21 has seen continued sales momentum, the company has not given any formal guidance but has indicated that there is a strong recovery in demand across the board.

- Blackstone deal in final leg of stages of closure: As per PEPL's management, the term sheet signed with the Blackstone Group for sale of office/retail/hotel assets is in the final leg of due diligence/other approvals. In case the deal with Blackstone is consummated, PEPL will receive Rs91.6bn as consideration which it can use to pay off existing debt of Rs53.7bn on these assets leaving PEPL with an existing surplus of Rs37.9bn to deploy for fresh capex/equity infusion in new office/mall/hotel assets. PEPL will be left with Rs2.7bn of annuity income stream post this transaction and as per PEPL management, the company may look to get back to its pre-Covid annual rental levels of ~Rs10bn in four-five years through build-out of new assets. In terms of overall debt levels, PEPL would be a net cash positive if this deal goes through and management has given a target net debt/equity ratio of 0.5x up to FY23E.

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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