Godrej Properties - Robust quarter; positives fairly priced in - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

Godrej Properties (GPL) reported an operationally robust 4QFY21 with pre- sales volume of 4.2msf (16%/74% YoY/QoQ) and value of INR 26.3bn (10%/77% YoY/QoQ), on the back of seven new launches, which contributed INR 15bn of pre-sales during the quarter. With that, GPL's pre-sales value/volume growth stood at 14%/23% in a challenging FY21. Collections were also robust at INR 20bn during the quarter. Despite the second wave, we expect GPL to register growth in FY22, given (1) healthy balance sheet (-0.07x net D/E), which is further strengthened by the recent QIP, (2) robust launch pipeline (12.3 msf), and (3) strong brand recognition. However, we reiterate REDUCE, as all the positives are fairly priced in. We change our FY22/FY23 estimates by 41/11% and target price to INR 1,323/sh (earlier INR 1,353/sh) to account for the QIP.

Financial highlights: GPL reported revenue/EBITDA/APAT at INR 4.3/(1.5)/(1.9) bn for 4QFY21. Adjusting for provisions in employee benefit expense (INR 1.2bn), inventory write-off (INR 760mn) and re-measurement of deferred tax assets on adoption of new lower tax regime (INR 810mn), EBITDA/APAT stood at INR 429/371 mn, against our estimates of INR 715/977 mn. Finance cost declined by 9% sequentially to INR 408mn. We expect strong topline growth over FY22-23 as revenue gets recognised from the projects added over the past few years.

Strong pre-sales growth; FY22 will see growth on robust launch pipeline: GPL's pre-sales value/volume growth stood at 14%/23% in FY21 as it booked higher ever sales in a quarter during 4QFY21 on the back of seven new launches. We expect GPL to record growth in FY22, given robust launch pipeline of 12.3msf. Sans the second wave of COVID, GPL was looking at 20% growth in pre-sales value. Given the delays in some of the upcoming Mumbai projects, management has not included those projects in the guidance. Launch of these projects could further support bookings.

Could see intense business developments over FY22/FY23: Post QIP fund- raise of INR 37.5bn, GPL became a net cash company at consolidated level with net D/E at -0.07x (vs 0.64x on Dec-20). We believe the comfortably levered balance sheet allows GPL to fund its ambitious expansion plans and add new projects. Outright land purchases have led to a sharp increase in inventories, from INR 21bn in FY 20 to INR 44bn in FY21.

Shares of Godrej Properties Ltd was last trading in BSE at Rs.1284.65 as compared to the previous close of Rs. 1308.6. The total number of shares traded during the day was 31075 in over 1706 trades.

The stock hit an intraday high of Rs. 1344.25 and intraday low of 1279. The net turnover during the day was Rs. 40352340.

Source : Equity Bulls

Keywords