Accumulate Prestige Estates; target of Rs 103: PLilladher

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Accumulate Prestige Estates; target of Rs 103: PLilladher

Prabhudas Lilladher is bullish on Prestige Estates Projects and has recommended accumulate rating on the stock with a target of Rs 103 in its February 1, 2012 research report.

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Prabhudas Lilladher is bullish on Prestige Estates Projects and has recommended accumulate rating on the stock with a target of Rs 103 in its February 1, 2012 research report.

"Prestige Estates Projects, revenues were in line, with estimates at Rs1.67bn, up 30% QoQ, but down 54% YoY. Subdued performance on the revenue front is on account of lack of new projects hitting the recognition threshold during the quarter. However, Q4 is expected to lookup, as White Meadows enters P&L and Neptune Courtyard expected to be completely recognized. EBITDA margins came in at 30%, a sequential decline of 840 bps, as lower proportion of high-margin projects got recognized during the quarter. Management expects 30-35% as a sustainable range for margins, going forward. PAT stood at Rs280m, a decline of 48% YoY; however, up 6.8% QoQ."

"Prestige Estates' new launch in Q3FY12, Sunnyside, has managed to sell >40% of the projects within three months of launch; another strong sales performance after the success of Tranquility and Park View last quarter. Thus, superior sales performance is reflected in the numbers for 9MFY12, wherein the company has achieved sales of ~Rs1.46bn surpassing the full year sales performance of ~Rs13.85bn in FY11. Also, the company has launched the large ~4 msf Bella Vista project in Chennai in January 2012. Here too, the response has been pretty strong, with the company having sold ~20% of the project within the first 15 days of launch. The hectic pace of launches is expected to continue with Prestige Mayberry (0.48 msf), Summerfield (0.93 msf) and SilverCrest lined up for Q4FY12."

"Although, Prestige's portfolio of office space saw no new leasing during the quarter, Shantiniketan Commercial witnessed leasing of ~0.56 msf, which has aided better debtor realization from this project for the company. Prestige continues to remain upbeat on commercial demand, citing a number of deals for their properties currently under negotiation. Rental income has not scaled up to the extent expected; however, Q4 is expected to be better as B5 and B6 start contributing to rental revenue stream. Notwithstanding delays, we expect the rental income to scale up to ~Rs2.5bn in FY14 from ~Rs1.6bn expected in FY12."

"Healthy sales of Rs4.7bn during the quarter, coupled with realization of ~Rs1.7bn of debtors from completed projects, shored up customer inflows to ~Rs3bn during the quarter. However, in addition to capex on rental assets of ~Rs0.5bn, land acquisition to the tune of ~Rs1.7bn (reflected in increase in loans & advances) resulted in consolidated net debt increasing by ~Rs1.1bn QoQ. Management has guided for a targeted net debt equity level of 0.55-0.6 compared to current levels of ~0.42. Thus, going forward, net debt is expected to continue to inch up as company invests in construction of rental assets as well as scout for new joint development deals." A continuing healthy sales performance, along with an expected scale-up in rental income stream, leads us to retain our positive stance on the stock. As per our estimates, the company's NAV stands at Rs147. Applying a 30% discount to the NAV, we arrive at our target price of Rs103 per share. We maintain Accumulate on the stock," says Prabhudas Lilladher research report. 

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