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Sales bookings impress, debt levels the key monitorable

Prestige Estates Projects (PEPL) clocked strong Q1FY24 sales bookings worth INR39.1bn (up 30% YoY) driven by new launches of 3.1msf and ongoing project inventory sales. For the remainder of FY24, the company has project launches lined up across South India, Mumbai and NCR having GDV of ~INR400bn. Consolidated net debt levels have risen by INR25.6bn over the last 12 months as the company continues to incur annual land/stake buyout spend of INR40-50bn and annual annuity capex of INR30-40bn. We expect the company’s net debt levels to rise further to INR84.4bn by Mar’24 and with gross incremental pending capex of over INR150bn for annuity assets. Company’s ability to balance growth and leverage will be the key monitorable going forward.

We revise our target price to INR611/share (earlier INR530) as we roll forward to 1x FY24E NAV and incorporate new project additions. However, we cut our rating to ADD from BUY post 14% rise in stock price in last 3 months. Key risks are residential demand slowdown and weak leasing.

Strong start to FY24, healthy launch pipeline

After a stellar FY23 where the company achieved FY23 gross sales bookings of INR129bn on the back of 16.5msf of new residential launches, Q1FY24 gross sales bookings were impressive at INR39.1bn (up 30% YoY) driven by new launches of 3.1msf and ongoing project inventory sales. For the remainder of FY24E and FY25E, the company plans to cumulatively launch 65msf of residential projects (32msf in FY24E and 30msf in FY25E), the company aspires to double annual residential sales bookings over FY23-26E to INR250bn annually with Mumbai market sales targeted to grow to INR50bn in FY26E (gross GDV of current Mumbai projects is INR419bn as per company) and new markets of NCR and Pune to grow to INR30bn and INR15bn annually, respectively. Major launches slated for FY24E include Park Grove (GDV of INR70bn), Noida residential (GDV of INR45bn), Pallava Gardens, Chennai (GDV of INR45bn), Prestige City, Hyderabad (GDV of INR70bn) and two luxury Mumbai launches of Ocean Towers, Marine Drive and Nautilus, Worli (GDV of INR150bn).

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