Buy Prestige Estates; target of Rs 630: HDFC Securities

HDFC Securities' research report on Prestige Estates

Prestige Estates (PEPL) registered the highest-ever annual presales of INR 129bn (+24% YoY) on the back of 16msf of launches and robust presales in MMR at INR 27bn. On the back of this, non-Bengaluru sales increased to 41%, from 20% in FY22. For FY24, it expects to achieve 25% growth in annual presales over FY23. It expects to achieve this on the back of a strong launch pipeline of 76msf with higher contribution expected from Mumbai MMR and Hyderabad along with Bengaluru (sales of which was subdued on account of lower new launches). In two significant transactions, PEPL acquired the balance stake in BKC and Mahalaxmi project from DB realty for INR 9/2bn resp. The total project cost in these two projects is INR c.75bn, of which PEPL has incurred INR c.30bn (incl. INR 11bn stake buy). For the BKC project, PEPL expects an increase in rental from INR 325psf pm to INR 350psf pm and cap rate compression to 8% from 9.5%(at the valuation stage). These two factors are expected to provide a valuation upside potential of INR 35bn. On account of this transaction, net debt increased to INR 55.7bn, from INR 41.7 bn in Dec-22.

Outlook

To maintain the growth momentum, PEPL is targeting residential BD of INR 200bn annually and may launch its first project in NCR subject to timely approvals. We maintain BUY, with an unchanged SOTP-based TP of INR 630/sh.