Well placed for growth
We maintain BUY post a stable quarter. Our SOTP-based TP is maintained at Rs 652. We have increased our EPS estimate by 2/2.1% for FY20/21E.
HIGHLIGHTS OF THE QUARTER
* 1QFY20 Revenue/ EBITDA/ APAT came in 97/74/72% higher YoY at Rs 11.8/2.3/0.9bn. The company maintained pre-sales momentum with 1.06mn sqft of sales by volume (up 11% YoY) in 1QFY20 valued at Rs 7.78bn. SDL expects the sales momentum to buildup during FY20E.
* Bengaluru continues to be the key pre-sales driver with pre-sales volume/value of 0.74mn sqft/Rs 5.4bn. During 1QFY20, SDL tied up land parcels to the tune of 143 acres across geographies including Bengaluru, Gurugram, Hyderabad and Trivandrum for Rs 1.5bn consideration. In FY20E non-Bengaluru pre-sales is expected to be driven by Kochi, Pune, Gift City, Chennai and NCR.
* Net debt has increased by Rs 3.2bn QoQ to Rs 27.5bn and net D/E is now at 1.2x (vs 1.09x QoQ). This increase is debt was primarily towards acquisition of 143 acres of land parcels across geographies for its future projects and a one-time consideration paid to JV partner in Gurugram project towards the integrated club-house. SDL has guided that debt may increase marginally from current levels but the company aims to maintain net D/E at 1.1x levels at the end of FY20E.
SDL has ~17.1mn sqft of unsold area in ongoing projects and expects to add 10.7mn sqft from new projects in the pipeline, over the coming quarters. Whilst SDL has only 0.3 mnsqft of unsold completed inventory worth Rs 1.2bn we remain cautious on land bank addition of Rs 1.5bn during 1QFY20 (when SDL already has high unsold under construction inventory). Net D/E is expected to reduce to 1.1x by FY20E as there were delays in agreement registration in two projects, which resulted in slower collections. The contracting business is seeing good growth with an order book of Rs 22.3bn. We maintain BUY.
(1) Further deterioration in NBFC liquidity,
(2) Weak order inflow in the contracting business,
(3) Dip in collection momentum and
(4) Any aggressive land bank addition.
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