Neutral on Godrej Properties - Motilal Oswal Q2 2010 Update

GODREJ PROPERTIES: 2QFY11 below est; Accelerated monetization through stake sale continues; Neutral

- Godrej Properties reported 2QFY11 revenue declined 12.4% YoY to Rs343m, net profit declined by 26.4% YoY to Rs329m. The lower than expected results is partly on account of muted revenue bookings, as a result of slow construction activity due to very heavy monsoon in 2QFY11.

- EBITDA fell 65.5% to Rs15m, implying an EBITDA margin of 4.4% (v/s 11.2% in 2QFY10 and 3.2% in 1QFY11).

- Other income stood at Rs494m vs Rs597m in 2QFY10. Other income was boosted by stake sale of 49% in Godrej Woodsman Estate II in Bangalore to India Realty Excellence Fund, promoted by Motilal Oswal Private Advisors.

- Management expects revenue and EBITDA margin to improve once the revenue from phase-II of Godrej Garden City, Bangalore and Mangalore projects starts getting recognized from 3/4QFY11 onwards.

We have revised our NAV to Rs717/share from Rs715/share to account and are also revising our FY11E PAT downward by 6% to Rs1.4b (v/s Rs1.5b), primarily on account of delay in revenue recognition from our expectation in key projects in NCR, Bangalore and Kochi. GPL currently trades at 30% premium to FY12E core NAV and 2% discount to option-adjusted NAV. It is fairly valued at 3.9x FY12E BV of Rs181 and 15x FY12E EPS of Rs46. Maintain Neutral.

Source : Equity Bulls

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