CRISIL assigns valuation grade 5/5 to Parsvnath Developers

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CRISIL assigns valuation grade 5/5 to Parsvnath Developers

CRISIL Research has come out with its report on Parsvnath Developers. The research firm has maintained the valuation grade 5/5 to the company in its December 12, 2011 report.

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CRISIL Research has come out with its report on Parsvnath Developers . The research firm has maintained the valuation grade 5/5 to the company in its December 12, 2011 report.

Parsvnath Developers Ltd's (Parsvnath's) Q2FY12 results were in line with CRISIL Research's expectations. Revenues grew by ~29% y-o-y (up ~18% q-o-q) driven by faster execution as we had envisaged last quarter. While EBITDA margins were better than our estimates due to higher contribution from plots sales, PAT margins were lower, impacted by under provisioning of taxes in the previous quarter. We maintain the fundamental grade of 2/5.

Q2FY12 result analysis:

• Consolidated revenues grew by ~29% y-o-y and ~18% q-o-q to Rs 2.5 bn driven by faster execution of projects and continued focus on plot sale.
• EBITDA margin at 28.4% (up 248 bps q-o-q) was better than our estimate of 25.5% for the full year. Higher contribution of plotted development in the overall revenue led to improvement in margins sequentially. However, it fell drastically y-o-y because in Q2FY11 Parsvnath had sold off some nonstrategic land parcels at a significant profit. Though the company has also sold off some non-strategic land parcels in Q2FY12, it was relatively smaller compared to the sale in the year-ago period.
• Adjusted PAT declined by 41.6% y-o-y (up by ~13% q-o-q) to Rs 291 mn due to reduced contribution from the sale of land parcels and under provisioning of taxes in the previous quarter.

Earnings revised downwards: Though revenue grew both on y-o-y and q-o-q basis, incremental bookings in the ongoing projects have not been very encouraging during the quarter; new bookings at 1.25 mn sq.ft. fell by 12.0% y-o-y. We have factored in significant delays in project execution cycle to consider the current slowdown in the industry. Given the impact of higher interest rates on property buyers and tapered booking numbers, we have reduced our revenue estimates for FY12 by ~14% to Rs 10.7 bn and for FY13 by ~6% to Rs 13.5 bn. Accordingly our EPS estimate for FY12 is reduced by ~18% to Rs 3.1 and for FY13 by ~13% to Rs 4.9.

Valuations: Current market price has strong upside We continue to use the net asset value (NAV) method to value Parsvnath. Given the increase in floor space index (FSI) in three of its luxury residential projects in the National Capital Region (NCR), we have revised our estimates for these projects. Of these, two were not considered in our earlier cash flow model and were part of the non-conceptualised land bank which were valued at cost. Since one of these two projects has now already been launched and booked 50% while the other one is ready for launch in April 2012, we have included them in our cash flow model. Though the increase in FSI will not have any impact on the near-term earnings as the execution of the increased space will take time, the same will have a positive impact on our NAV. Consequently we revise our fair value from Rs 48 per share to Rs 63 per share.

To read the full report click on the attachment

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.

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