Weak quarter; Near-term pain likely to continue
* Except for office leasing, all other segments (Residential, Hospitality and Retail) are likely to see near-term challenges due to the ongoing lockdown.
* However, medium-to long-term outlook for BRGD remains promising due to (a) robust line-up of launches, (b) favorable product mix, and (c) strong foothold in markets that it operates in. Maintain Buy on account of favorable risk-reward.
COVID-19 led disruption percolates across segments
* Site visits amidst lockdown impacts residential sales: BRGD reported presales of 0.42msf (down 63% YoY), implying booking value of INR2,499m (down 58% YoY) in 1QFY21. Average price realization was up 14% YoY to INR5,956, largely driven by higher contribution from Commercial Real Estate (CRE) sales.
* Mall closures hurt leasing segment: Leasing revenue was down 9% YoY, largely impacted by closure of the mall business. Office segment remained steady with rent collection at 98% in 1QFY21. There were no renegotiations/cancellations for operational office leasing assets.
* Hospitality remains the worst hit segment: Hospitality was among the worst-hit segments due to COVID-19. Average occupancy in the Hospitality segment stood at 11% in 1QFY21, largely driven by repatriation guests. Hospitality is likely to remain subdued for a major part of FY21.
* Financial performance: In 1QFY21, revenue/EBITDA declined 71%/74% while EBITDA margin contracted 240bp. Adj. PAT-level loss stood at INR527m in 1QFY21 (v/s adj PAT est. INR174m and INR412m in 1QFY20).
Key management commentary highlights
* Key industry trends over the last couple of months for the residential segment are (a) preference for ‘ready to move in’ or near-completion projects, (b) larger homes, and (c) increased demand from NRI customers.
* BRGD has availed moratorium for its debt of INR12b pertaining to the retail and hospitality businesses.
Valuation and view
* With no near-term visibility for the lockdown situation normalizing, we have lowered our estimates for Residential pre-sales/Hospitality revenue by 28%/32%. However, we expect momentum to continue in the medium term, driven by a robust line-up of launches across business segments, strong execution capabilities and the right product mix. Maintain Buy with TP of INR192/share.
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