Hold Orbit Corp; target of Rs 50: PINC Research

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Hold Orbit Corp; target of Rs 50: PINC Research

PINC Research has recommended hold rating on Orbit Corporation with a target of Rs 50, in its May 26, 2011 research report.

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PINC Research has recommended hold rating on Orbit Corporation with a target of Rs 50, in its May 26, 2011 research report.

"During Q4FY11, Orbit Corp's (ORB's) net sales decreased by 21% YoY to Rs681mn, 23% lower than our estimate. The EBIDTA margin expanded to 48% as against 31% in Q4FY10, a 1762bps increase YoY on account of increased realization from the sale of Napeansea project. We maintain a HOLD on ORB because: 1) Sales booking have significantly decreased which may impact cash inflows and this scenario is likely to continue for H1FY12. 2) Mandwa project has already been priced in and we see no fresh sales booking happening. 3) The stock has already discounted the acquisition of NS block project and Malabar Hill project."

"The total revenue from sales in Q4FY11 stood at Rs504mn as against Rs1,335mn in Q3FY11. Sales during Q4FY11 significantly reduced to .01msf as against .06msf in Q3FY11. For the full year FY11, area sold stood at .28msf as against .38msf during FY10. We expect this trend to continue in H1FY12 thereby giving poor fresh cash inflow visibility. EBITDA margin for Q4FY11 stood at 48% as against 31% for Q4FY10. The rise in EBITDA was primarily driven by sale of apartments in the Napeansea project which led to higher realizations. The average realization in Q4FY11 was Rs65,778 psf as against Rs54,537 psf in Q3FY11 for the Napeansea project. The company has a aggressive launch plan for FY12 which includes Lalbaugh, Santacruz and Napeansea Road. The total area of these projects is ~0.2msf. The company should launch more projects in FY12 in order to keep the cash inflow intact. The company expect's to get a cash inflow of ~Rs7bn (including old projects)."

"We continue to maintain our 'HOLD' recommendation on the stock with a reduced target price of Rs50 from Rs65 earlier. We have increased our discount on the NAV to 30% from 20% earlier as we see no near term triggers for the stock," says PINC Research report.

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