Buy DS Kulkarni Developers with a target of Rs 584: P-Sec

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Buy DS Kulkarni Developers with a target of Rs 584: P-Sec

Broking house, P-Sec is bullish on DS Kulkarni Developers and has recommended buy rating on the stock with a target of Rs 584.

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Broking house, P-Sec is bullish on DS Kulkarni Developers and has recommended buy rating on the stock with a target of Rs 584.

P-Sec report on DS Kulkarni Developers:

"DSK Developers ltd, a first generation enterprenual venture of Mr D.S Kulkarni, is Pune based real estate company incorporated in 1991. The company has its corporate office in Pune and branch offices at Mumbai and Bangalore. The company along with its group companies has constructed and handed-over more than 15,000 tenements ad measuring 12.5 msf of constructed area. The company targets NRI's through its representatives in USA, UK and the Middle East. After focusing on the Pune market for more than 20 years the company is now expanding to Mumbai and Bangalore in a bid to be a national player. DSK has recently floated a 100% subsidiary in USA, to take up residential projects in USA."

• The company has eight projects in the advance stages of construction, which are expected to be completed over the next 18 months. Since the company follows the completed contract method of revenue recognition the next six quarters are expected to be   robust
• DSK is all set to reap in the benefits of strong demand in office space (direct) and residential space (derived) in Pune (A DSK stronghold) from IT and ITeS.
• The company debits its WIP account for the cost incurred in incomplete projects including land cost. This WIP forms part of the topline.
• Our DCF valuation with a zero terminal value gives us a one year forward fair value of Rs 551. We have taken zero terminal value due to lack of information on the future projects and related cash flows.
• The NPV value of the company based on SOTP valuation methodology yields a value of Rs 584. The group has a land bank of around 650 acres with 90% in and around Pune.
• The stock is trading at 23.7x FY07P EPS and 11.4x FY08P EPS and remains the only real estate pure play whose valuation is not looking stretched in terms of P.E.

"We are initiating coverage on the stock with a BUY recommendation and price target of Rs 584."