Buy Brigade Enterprises; target of Rs 739: HDFC Securities

HDFC Securities' research report on Brigade Enterprises

Brigade Enterprises Ltd (BEL) reported decent presales of 1.5msf (+22%/-38% YoY/QoQ), valued at INR 9.9bn (+22%/-33% YoY/QoQ). Most of this was sustenance sales with just one project of 0.26msf launched during the quarter. With the government change in Bengaluru, new project approvals got deferred, derailing new launches. The launch plan is expected to be back on track from Q2FY24 onwards with a total of 7.9msf of residential project with GDV of INR 67bn planned for FY24. 25% of these launches will be from the Mount Road Chennai project (i.e. TVS land). In terms of BD, BEL added 9.7acre land in Kokapet, Hyderabad with INR 7bn to be spent towards this acquisition (to be paid in the next 90 days). With this, the total land payment pending is INR 14bn. The saleable potential of the Kokapet land is 3.5msf (FSI of 8) with the EBITDA margin expected between 25-30%. With the environmental clearance pending, the launch will likely happen by Q2FY25. Within the office segment, the occupancy has improved with overall occupancy at 84%. Non-SEZs are 100% leased.

Outlook

The overall net debt decreased to INR 20bn (INR 21bn in Q4FY23), with total debt in real estate segment reducing significantly to INR 10mn (vs. INR 465mn in Q4FY23). Given BEL’s strong cash position of INR 17.7bn, a robust business development pipeline, and a healthy balance sheet, we remain constructive. We reiterate BUY, with an unchanged TP of INR 739/sh.

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