JP Morgan upgrades Unitech to overweight, raises target price to Rs 60

JP Morgan has upgraded Unitech to overweight with target price raised to Rs 60 a share, reports CNBC-TV18's Priyanka Ghosh.

The basic point of the report is that there is a big discrepancy in Unitech's stock price and the land valuation that Unitech has. The JP Morgan report has valued the land at Rs 19,200 crore and they have taken two large land parcels, that is, 900 acres in Gurgaon and 350 acres in Noida. Now the land value has been estimated at Rs 62 per share and they have also mentioned in the report that liquidity is not an issue for Unitech. The company has Rs 3,000 crore of receivables pending and therefore that money is yet to come and that will not be an issue for the company going forward. Although it has said that the earnings needs to be ramped up and that will be a key trigger. They said that Unitech's run-rate has been about Rs 1000 to Rs 1200 crore on a quarter-on-quarter basis and that Unitech's Grande project will be a key growth driver. So, they have estimated that they will do a PAT of about Rs 13,000 crore next year, this year if they finish at about Rs 650 crore. They are forecasting a double for that amount and the only risk that they have outlined is its exposure to markets like Chennai, Hyderabad and other markets, other than of course Gurgaon and Noida. Several brokers and other analysts in the market are correlating two things. The company might have a land parcel and the value of that land parcel is only dependant on how much you can sell the land parcel at. If currently, there is no buyer then how much the land parcel can fetch you and what is the valuation is pretty much anybody's shot. Also, Unitech's did 16 million square feet last year, this year they are going to do 10 million square feet. They don't know how a 100%  jump in their PAT going forward is forecasted. The brokers also say that, Rs 3000 crore of receivables is pending which is not a good sign at all. What is the reason for this pending receivables which we have been talking about that it has been mounting in the balance sheet for a while. Nobody knows the timeline for that money to come in. There is no mention of the 2G scam at all, there is no mention of any concerns that analysts might have. Because there are certain reports suggesting that their names might come up in the charge sheet. None of this is actually mentioned in the report. Also watch the accompanying video... Don't Miss SREI Infra awaits RBI nod for infrastructure finance company status