CRISIL upgrades Ashiana Housing`s fundamental grade to 4/5

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CRISIL upgrades Ashiana Housing`s fundamental grade to 4/5

CRISIL Research has come out with its report on Ashiana Housing. The research firm has assigned a valuation grade of 5/5 to the company in its December 7, 2011 report.

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Ashiana Housing BSE | NSE 30/05/12 Are Mutual Funds betting on Ashiana Housing?

CRISIL Research has come out with its report on Ashiana Housing . The research firm has assigned a valuation grade of 5/5 to the company in its December 7, 2011 report.

Ashiana Housing Ltd (A mid-size developer in north India) has established a strong brand based on quality construction and timely delivery of projects. While majority of developers have fallen prey to a weak macroeconomic environment, Ashiana has recorded healthy bookings. We draw comfort from its relatively superior financial performance (high RoE), strong balance sheet (low gearing of less than 0.1x), improved land bank visibility and receipt of approvals for the Pune-based Utsav Lavasa project. Consequently, we revise our fundamental grade to 4/5 from 3/5, indicating superior fundamentals relative to other listed equity securities in India. However, sustained slowdown in the industry could impact future prospects.

Healthy traction in ongoing projects; superior performance than peers
Ongoing projects witnessed healthy traction - equivalent area constructed (EAC) in Q3FY11-Q2FY12 was 1.2 mn sq.ft. vs. 1 mn sq.ft. in Q3FY10-Q2FY11. Bookings registered strong growth, up from 1.1 mn sq.ft. to 1.5 mn sq.ft. during the same period. Ashiana's performance was superior - revenues grew 28% during FY07-11 vs. peers' average of 11%, while PAT grew 47% compared to an average -5% growth by other developers.

Recent land acquisitions boost future visibility; eyeing diversifications
Acquisition of 40 acres in Thada, Bhiwadi and 10 acres in Uttarpara, Kolkata quells our concerns on revenue visibility. Ashiana plans to develop ~3.2 mn sq.ft. of group housing and active senior living projects, which will add to the future pipeline of 3.6 mn sq.ft. It plans to diversify geographically and is looking to acquire ~20-30 acres in western or southern markets.

Lavasa project cleared; assumed gradual ramp-up in bookings
Given the environment ministry's clearance to Lavasa township project after a delay of one year, we expect construction at Utsav project to commence in a month. Since it is based on certain pre-conditions, there could be some hurdles. We expect bookings to be slow initially and gradually pick up in FY13.

Revenues to grow at a two-year CAGR of 23%, RoCE to increase
We expect revenues to register a two-year CAGR of 23% to Rs 2.1 bn in FY13 driven by bookings in the Ashiana Aangan and Rangoli Gardens projects (both in Rajasthan). EBITDA margin is expected to improve by 350 bps to 35% in FY13 due to increase in contribution from high-margin projects. RoCE is expected to improve to 28% in FY13 from 26.8% in FY11.

Valuations - current market price has strong upside
Though construction at Lavasa Utsav is expected to start in a month, there could be further hurdles given the conditional clearance. We continue to use the net asset value method for Ashiana, but halve our discount for the Utsav project's NAV to 25% from 50%. Accordingly, we raise the fair value to Rs 205 per share from Rs 195. This translates to a valuation grade of 5/5.

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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