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Feb 14, 2013, 07.01 PM IST | Source: Moneycontrol.com

Bhartiya Int'l: Real estate project gets healthy response

CRISIL Research has come out with its report on Bhartiya International. The research firm expects the company's focus on the accessories and the textile segments to enable it to report healthy revenue growth in FY14. We maintain our 17% revenue growth target for FY14.

CRISIL Research has come out with its report on Bhartiya International . The research firm expects the company's focus on the accessories and the textile segments to enable it to report healthy revenue growth in FY14. We maintain our 17% revenue growth target for FY14.

Bhartiya's Q3FY13 standalone revenues were in line while operating profitability was marginally lower than CRISIL Research's expectations. Bhartiya group's maiden real estate project in Bengaluru has received good response with 80% (2 mn sq. ft) of the residential phase already booked. However, execution of such a large real estate project and exit of the PE investor are monitorables. We maintain our fundamental grade of 3/5, indicating that its fundamentals are good relative to other listed securities in India.

Standalone revenues increased by 11.5% y-o-y to Rs 733 mn as the company focused more on its accessories and textile segments. Revenues from the leather products business declined marginally to Rs 635 mn but its share in overall revenues declined to 87% compared to 98% in Q3FY12. Revenues from the textile garment segment rose from a lower base of Rs 11.5 mn in Q3FY12 to Rs 96.8 mn in Q3FY13. EBIT margin of the leather division improved y-o-y to 10.4% from 8.7%, but for the textile division, it contracted to 6.6% from 9.1% in Q3FY12. Both the segments reported sequentially lower margins. With rise in the share of textile business, raw material cost increased to 65.2% - as percentage of revenue - from 61.8% in Q3FY12 (63.4% in Q2FY13).

The recruitment of some senior level personnel has increased employee cost by 61.2% to Rs 33 mn (from Rs 20 mn in Q3FY12). We expect the company's focus on the accessories and the textile segments to enable it to report healthy revenue growth in FY14. We maintain our 17% revenue growth target for FY14.

The company reported profit of Rs 21 mn compared toRs 18 mn in Q3FY12. The company reported EPS of Rs 1.9 compared to Rs 3.3 in Q2FY12 (Rs 1.6 in Q1FY13).

Real estate project witnessed healthy booking levels
Bhartiya Urban Infrastructure & Land Development Company Pvt. Ltd (or BUILDCO, where Bhartiya has 30% stake) has launched the first phase of its residential apartments (under the brand Nikoo Homes). Bhartiya indicated that it has opened the bookings for two more towers, as the three towers launched in October 2012 got sold within two months. The company is yet to finalise the EPC contractor for its residential projects. Considering the size of the project and this being the company's maiden venture, execution is a key monitorable.

Fair value revised to Rs 247
We continue to use the sum-of-the-parts method to value Bhartiya and have rolled forward our model to FY15. We revise our fair value to Rs 247 from Rs 180 per share largely due to the successful launch of its real estate project. Based on the current market price of Rs 170, our valuation grade is 5/5.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"

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