Sell Godrej Properties; target of Rs 655: PINC Research

“Godrej Properties (GPL) reported topline of Rs1.5bn for Q3FY12, up 7% QoQ and above our estimate of Rs1.2bn. EBITDA margin at 17.9% fell by 511bps QoQ (PINCe 24.4%). PAT stood at Rs286mn and grew 47% QoQ. Revenue during the quarter was mainly recognized from Godrej garden city (GGC), Godrej Prakriti, Godrej Frontier & Godrej Genesis. Fall in margins was on account of revenue from Godrej Genesis where margins are low. GPL also reported other income of Rs201mn (PINCe of Rs258mn) which was mainly from 49% equity stake sale in Godrej Premium Builders Pvt Ltd to Sun Apollo real estate fund. The company launched ~0.32msf during the quarter (GGC ph-III – 0.16msf; Godrej Platinum, Vikhroli – 0.16msf).”

“GPL’s topline stood at Rs1.5bn; up 7% QoQ. Revenue during the quarter was mainly recognized from Godrej garden city (GGC), Godrej Prakriti, Godrej Frontier and Godrej Genesis (see next page). The company in Q3FY12 sold 0.52msf (Rs3.5bn) as against 0.57msf (Rs2.1bn) in Q2FY12 and launched ~0.32msf during the quarter (GGC ph-III – 0.16msf; Godrej Platinum, Vikhroli – 0.16msf). EBITDA Margin at 17.9% fell 511bps QoQ. We believe fall in margins is on account of revenue contribution from Godrej Genesis, Kolkata, where the margins are low. Reported PAT at Rs286mn was up 47% QoQ. The company reported other income of Rs201mn (PINCe of Rs258mn). Other income was mainly recognized from 49% equity stake sale in Godrej Premium Builders Pvt Ltd to Sun Apollo real estate fund for Rs450mn of which Rs183mn has been paid to GPL and rest invested in Godrej Premium Builders Pvt Ltd.”

“The company’s net D/E increased to ~2x (Net Debt or Rs19.2bn) during the quarter. This is primarily on account of the Jet BKC deal and other commercial projects (Chandigarh, Kolkata and Mumbai). Going forward, the key focus of the company would be to reduce the debt levels by monetizing commercial assets and also via fresh equity infusion. GPL has received board approval to raise up to Rs7.5bn equity capital. This fresh equity will also help reduce the promoter’s stake from the current 83% to <75% by June’13. We continue to maintain our ‘SELL’ rating on the stock with a target price of Rs 655,” says PINC Research report.

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