Buy Prestige Estates Projects; target of Rs 280: HDFC Securities

HDFC Securities' research report on Prestige Estates Projects

PEPL pre-COVID re-rating was backed by robust expansionary plans on asset build out and likely de-leveraging through REIT. New business development initiatives in Mumbai market and stake purchase in DIAL hotel in Delhi was being looked at geographical diversification. COVID-19 puts spanner in the wheel and we believe it’s time for PEPL to refine capital allocation and restrict high exposure to hospitality and Mumbai premium/office projects. As such FY21E residential collections will remain subdued and headwinds like work from home & retail footfall/hotel occupancy normalization will take time. Nonetheless PEPL remain well placed to tide over near term weakness with timely fund raise of Rs9bn during 4QFY20 and likely pre REIT placement in FY21E.

Outlook

We maintain BUY on PEPL with SOTP of Rs 280/sh. We have decreased our FY21/22E EPS estimates by 40%/31% to factor in protracted recovery from COVID-19 related slowdown in sales velocity as well as construction, and delayed launches.

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