Buy Anant Raj Industries; target of Rs 147: Sushil Finance

“Anant Raj Industries has come out with good set of numbers for Q4FY11. The revenue is up by 79.9% YoY while the PAT is flat YoY. • During the quarter ended Q4FY11, Anant Raj’s Revenue is up by 79.9% YoY to Rs.634.1 Mn. Residential business accounts for 69% of the total income followed by Rental income of 30.1% and rest from Ceramic Tiles business. • The company’s rental income for the quarter is at Rs.194.4 Mn vs Rs.149.7 Mn of Q4FY10. Rent from IT business is Rs.69 Mn while that from the hotel business is ~Rs.72Mn and the rest from the commercial property. In FY11 the company has accounted for a rental income of Rs.760.5 Mn vs Rs.489 Mn of FY10. • The leased area for Q4FY11 stands at to 1.1MSF which is flat QoQ but up by 21% YoY. The company has received rent for ~600,000 SF of the Manesar IT park. • The company’s real estate income (Residential) for Q4FY11 is at Rs.438.2 Mn vs Rs.183.6 Mn of Q4FY10. The company’s revenue from the real estate business has stabilized as it is focusing more towards residential business. Kapashera has contributed ~21% to the residential income of Rs.438.2mn, while the Manesar residential project has contributed ~67%.”

“The company’s operating profit is up by 73.4% YoY to Rs.454.7 Mn. Its Operating profit margin is at 71.7% vs 74.4% of Q4FY10. • Its Net Profit is flat YoY Rs.306.7 Mn. The Net Profit Margin for Q4FY11 stands at 48.4% vs 87.8% of Q4FY10. Relatively lower Net Profit is mainly because of increase in interest expense, higher tax outflow and lower other income. • The company has added three land parcels in FY11 for immediate execution at a cost of ~Rs.700 Crs resulting in increase in the debt. Delay in the Hauz Khas and Bhagwan das project would be compensated by huge sales volume generated by these three projects. Despite of sharp increase in debt, the D/E ratio stands at just 0.2 for the company. • For FY11, ARIL has reported revenue of Rs.4240.7 Mn up by 48.1%. The Operating profit is down by 8.9% YoY to Rs.2355.5 Mn with operating profit margin at 55.5%. De-growth in operating profit is mainly because of higher revenue contribution from cost bearing residential business, which is 38.2% of the total sales. Net Profit for FY11 is down by 29.5% YoY Rs.1680.1 Mn with Net Profit Margin at 39.6%.”

“Anant Raj’s Q4FY11 results are very much in line with our expectations. The company is now likely to witness stable revenue, as its exposure towards the residential business is increasing. ARIL is likely to develop ~11 MSF in next three-four years in the residential segment. In FY11 the company has accounted for a rental income of Rs.760.5 mn vs Rs.489Mn of FY10. The Kirti nagar mall project of the company has been delayed and is likely to fetch rentals from July-2011. Considering the delay of the Kirti Nagar mall and delay in getting the approvals of the Hauz Khas and Bhagwan das project we have reduced our FY12 EPS estimates by 14% to Rs.6.9. We have not taken into account any revenue from the Hauz Khas and Bhagwan das project till FY13 till any further clearance. We maintain our BUY rating on the stock with a NPV based price target of Rs 147,” says Sushil Finance research report.

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