Sunteck Realty - Q4FY21 - All eyes on upcoming launches - ICICI Securities

As per Sunteck Realty's (SRIN) Q4FY21 operations update, after a tepid H1FY21, the company has clocked robust sales bookings of Rs3.7bn in Q4FY21 as well (up 6% QoQ) along with record quarterly collections of Rs3.2bn. With sales momentum sustaining for completed/launched inventory, SRIN is targeting to launch the Naigaon Phase III and Vasai/Vasind projects in FY22E which is expected to boost sales in FY22-23E. We maintain our BUY rating on SRIN with a revised target price of Rs443/share (earlier Rs437) based on 1x NAV. The change in our target price is driven by including value of new Borivali project addition and exclusion of Andheri West project as the JDA agreement with the landowner has been cancelled. Key risks to our call are slowdown in the Mumbai property market volumes and fall in residential/commercial prices.

- Strong end to FY21 sales bookings and collections: SRIN's Q4FY21 sales bookings of Rs3.7bn were up 6% QoQ driven by continued momentum in ODC, Goregaon project (Rs2.0bn), BKC projects (Rs0.9bn) and Naigaon (Rs0.8bn). SRIN also achieved record quarterly collections of Rs3.2bn in Q4FY21 with ODC, Goregaon (Rs1.0bn), BKC projects (Rs0.5bn) and Naigaon (Rs0.9bn) being the major contributors. While H1FY21 sales bookings of just Rs3.0bn were impacted by Covid, the strong bounce back in H2FY21 with sales bookings of Rs7.2bn has enabled SRIN to report FY21 sales bookings of Rs10.2bn (down 16% YoY) and collections of Rs7.8bn (up 9% YoY).

- Slew of launches targeted in FY22E: As per SRIN's management, in light of the sales momentum sustaining for completed/launched inventory, the company is targeting to launch the Naigaon Phase III and Vasai/Vasind projects in FY22E which is expected to boost sales in FY22-23E. In addition to these upcoming launches, the company also has an estimated unsold inventory of Rs13bn in ODC, Goregaon project (Rs9-10bn in Avenue 4 and balance in completed/nearing completion Avenue 1 and 2 phases) and Rs5bn in the Naigaon Phase 1 and 2 affordable housing project. Apart from its existing portfolio of projects, the company continues to pursue business development opportunities through an asset light JDA model. Over the long term, SRIN's affordable housing projects are expected to contribute 50% of sales bookings.

- Borivali project acquisition an additional positive: SRIN has recently acquired a 7acre land parcel in Borivali West (Mumbai's Western suburbs) on JDA basis where it will have an effective 72% revenue share in the development of a luxury residential project with a saleable area of ~1msf. Assuming a launch price of Rs14,000/psf in FY22E and construction cost of Rs5,000/psf with 5% YoY escalation in selling price and costs, we estimate NAV accretion of Rs2.7bn (Rs 19/share) from this project.

Valuations & views

- We like SRIN because it (1) enjoys strong brand recall in Mumbai (2) has strong balance sheet with net debt of 0.3x and (3) asset light model of land acquisition in the Mumbai Metropolitan Region.

- We have valued SRIN on SoTP basis with a combination of DCF-based NAV on FY21E basis.

- We value SRIN's affordable housing foray at Rs5.6bn or Rs40/share. We have assumed a total saleable area of ~10msf on the 100-acre land parcel with project launches over 3 phases and sales/construction cycle from FY19-FY27E.

- We have also assumed a business development value of Rs10bn for Vasai/Vasind acquisitions.

- We maintain our BUY rating on SRIN with a revised target price of Rs443/share (earlier Rs437) based on 1x NAV. The change in our target price is driven by including value of new Borivali project addition and exclusion of Andheri West project as the JDA agreement with the landowner has been cancelled.

- Key risks to our call are slowdown in the Mumbai property market volumes and fall in residential/commercial prices.

Shares of SUNTECK REALTY LTD. was last trading in BSE at Rs.276.25 as compared to the previous close of Rs. 275.2. The total number of shares traded during the day was 30472 in over 1395 trades.

The stock hit an intraday high of Rs. 286 and intraday low of 274.4. The net turnover during the day was Rs. 8525363.

Source : Equity Bulls

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