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Jul 23, 2010, 09.36 AM IST | Source: CNBC-TV18

Edelweiss Sec sees tepid Q1 for realty pack, suggests picks

In an exclave interview with CNBC-TV18, Aashiesh Agarwaal, VP-Research, Real Estate Analyst, Edelweiss Securities, speaks about what he expects from real estate sector this earnings season.

Aashiesh Agarwaal, VP-Research, Real Estate Analyst, Edelweiss Securities

In an exclave interview with CNBC-TV18, Aashiesh Agarwaal, VP-Research, Real Estate Analyst, Edelweiss Securities, speaks about what he expects from real estate sector this earnings season.

His top picks are DLF and Unitech .

Here is a verbatim transcript of the exclusive interview with Aashiesh Agarwaal on CNBC-TV18. Also watch the accompanying video.

Q: What is the expectation generally from the sector? Will it show a remarkably better performance than the fourth quarter which incidentally was not bad?

A: We are actually expecting the first quarter results to be softer than the fourth quarter results due to a mix of reasons. For instance, DLF has had no launches in this quarter and we do know that DLF revenues are driven by new launches, besides being driven by the on going PoCM of their projects.

Unitech, on the other hand, has had a very strong Q4 on lumpiness and revenue recognition as several of the projects had reached the threshold limit. So again we donít see that happening for Unitech in this quarter. The first quarter tends to be softer quarter for the sector. So, yes, we do expect the first quarter to be softer in terms of revenues and profits for the sector as a whole.

Q: Your earnings expectation on DLF and do you have a buy on the stock at all?

A: Yes, we have a buy on DLF. We think that they will do a revenue of Rs 1,800 crore for the quarter and about Rs 400 crore of profit for the quarter. So, we are pretty positive on the execution pick up thatís happening at DLF and the related milestone payments that they will be getting out of it.

Over and above that, they are having a strong leasing portfolio and with the projects tend to be high value projects, therefore they will have a good amount of cash generation and also expect the asset monetization to pick up. Over and above, this year improvement in the leasing environment will be a significant positive for DLF as they are a key beneficiary of pick up in the leasing environment.

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