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Pre-sales robust, collections stable
KPDL financial performance under POCM was ahead of our estimates. Pre sales picked up in 3QFY20 after a weak 2QFY20. Stable collections and Net D/E within acceptable limits are other key positives. Maintain BUY with revised TP of Rs 310/sh.
HIGHLIGHTS of the QUARTER
* POCM performance beats our estimates: In order to maintain continuity, KPDL also provides key financials under POCM. The like-to-like comparison vs our estimates are as follows: 3QFY20 revenue: Rs 3.4bn (21% YoY, 11% beat), EBITDA: Rs 770mn (38% YoY, 26% beat) and APAT: Rs 380mn (105% YoY, 25% beat). KPDL has adopted lower tax rate of 25.17% from 2QFY20.
* Strong pre-sales recovery QoQ: In a subdued real estate market KPDL recorded 0.82mn sqft pre-sales, a 2%/65% YoY/QoQ growth (led by strong traction in Life Republic, Opula and Ivy Estate). Pre-sales value grew 53% QoQ to Rs 4.1bn as realization dipped, and remained muted at Rs 4,966/sqft. This was partly driven by promotional campaign at Life Republic, wherein it sold 500 1/3 BHK units in 38 days for Rs ~2bn. KPDL remains on track to achieving its annual pre-sales guidance of 2.4-2.7mn sqft for FY20E. No major launches are envisaged for Q4FY20.
* Net Debt increases, net D/E at 0.56x: KPDL 9MFY20 collections grew 9% YoY to Rs 9.9bn. Net cash has gone down by Rs. 450mn QoQ, due to cash outgo of Rs 700mn towards payment of second tranche for buyout of ICICI Ventures 50% stake in Life Republic, which was funded through internal accruals. This resulted in net debt increasing slightly by Rs 420mn QoQ to Rs 5.2bn. Overall Net D/E increased from 0.51x to 0.56x QoQ, slightly higher than 0.5x net D/E guidance end FY20E.
* Mumbai projects approvals to come by Mar-20E, launches in FY21E: Approvals for KPDL 3 Mumbai projects are largely in place with pending last mile approvals to be completed over next couple of months. All the 3 projects are slated for launch in FY21. With aggregate sales potential from these 3 projects is ~Rs 11bn, Mumbai projects will be key for further re-rating.
Buoyed by the response to the promotional campaign at Life Republic, KPDL recorded robust pre-sales enabling the company to stay on track for its pre-sales target for FY20E. Though lack of new launches during 2HFY20 is a dampener, KPDL has a strong launch pipeline across Mumbai and Pune for FY21E with 3 commercial projects slated for launch in Pune. Mumbai and Bengaluru continue to be key markets for the company outside of its home base. We derive comfort from large part of KPDL portfolio being affordable and midincome segment. We remain constructive and maintain BUY. Key monitorables: (1) Aggressive competition in home market, (2) Leverage position.
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