Accumulate Parsvnath Developers - Bowls a better delivery - Elara Capital

• Parsvnath Developers
• Rating : Accumulate
• Target Price : INR150
• Upside : 9%
• CMP : INR138 (as on 13 August 2010)

Bowls a better delivery

Focus on fast-track execution pays off

Parsvnath Developers Ltd (PDL) reported net sales of INR2,571mn, an increase of 123% YoY, but on a sequential base, sales have decreased by 28% (due to one-off revenues from monetizing non-core assets across India in Q4FY10).

With its focus on the fast-track execution of projects, the company has delivered 1.39 msf in Q1FY11 vis-à-vis 1.8msf in FY10. The company has achieved a higher offtake to 0.7msf in Q1FY11 vs 0.56msf in Q1FY10. Parsvnath has experienced majority of fresh sales in the Group Housing and Townships segments.

Higher realizations power margin expansion

Increasing realty prices, particularly in the NCR, have led to a hike in the average realization at INR2,500 psf which includes luxury projects such as La Tropicana. The average realization from luxury segment has gone up to INR4,370psf while the same for affordable housing is higher at INR1,825psf.

The price appreciation and realization helped expand operating margin to 27%, an increase of 314bps QoQ. However, lower non-operating income (down 34%) and a 8% higher minority interest has depressed PAT to INR 318mn.

Valuation: Quick recovery to healthy state, maintain Accumulate

We notice that the company has gained from price appreciations in recent times in Delhi and NCR region as reported by its peers. The commercial properties are also benefitted from price appreciation in Delhi NCR. With deliverables of 18msf in commercial assets, the company is poised to get a pie of the price appreciation in Delhi and NCR. The company currently trades at PBV 1.05 of FY11. With an 8% upside to our target price of INR150, we maintain Accumulate.

Source : Equity Bulls

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