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Life-time high sales volume growth…

Key highlight of Brigade Enterprises’ (BEL) Q4FY21 result was lifetime high sales volume of ~1.7 million sq feet (msf) worth | 1018 crore, up 58% YoY and 56% YoY, respectively, driven by strong traction of newly launched project in along with ongoing projects. On the financial numbers, reported revenues grew 24.4% YoY to | 791.2 crore, on account of strong revenue recognition in the residential segment. Reported EBITDA margins were up 260 bps YoY to 23.9%. BEL reported a loss of | 39.6 crore.

Strong residential volumes growth

During the quarter, BEL launched projects spanning ~3 msf (~6 msf for FY21). The company indicated that 30% of the sales value were from new projects in Q4FY21 and Hyderabad & Chennai accounted for 40% of the volumes. Going ahead, BEL has a launch pipeline of 1.43 msf (BEL’s share: 0.91 msf) and further projects worth ~2 msf is likely to get approval for launch within the next two quarters. This should aid sales volume ahead along with continued traction in ongoing projects (~7.2 msf of area to be sold) as well as land bank of ~27 msf. Post a strong 4.6 msf sales volume in FY21, we bake in 4.5 msf of sales volume in both FY22E and FY23E.

Commercial segment stable; malls, hotels recovering

Overall lease rental was at | 121.4 crore, up 16.3% aided by incremental lease revenues from Brigade Tech Garden (BTG) Phase 2. Footfall recovery at malls was at ~75% and consumption at 90% of pre-Covid levels. With lockdown led closure in Q1FY22 owing to second wave, BEL indicated that it would continue to follow a similar formula of waiver. Commercial leasing segment for offices remains stable for BEL and has achieved 99% collections.

During Q4 it leased ~0.1 msf. On the new commercial property, it is yet to lease 1.65 msf and 0.3 msf in BTG Phase 2 and WTC Chennai. BEL indicated that there is an increased momentum in office leasing enquiries. The active leasing pipeline is ~1 msf and BEL expects to the same to fructify gradually as the economy reopens. The hotels occupancy rose from 27% in Q3 to 43% in Q4FY21, with gross operating profit (GOP) of | 7.3 crore (| 4.2 crore in Q3). GOP margin was at 22% vis-à-vis 16% in Q3).

Valuation & Outlook

The strong recovery in the residential segment aided the overall cash generation and debt reduction by ~| 195 crore in residential segment in FY21 while commercial leasing pickup could be gradual, going ahead. Furthermore, full reopening of economy is likely to boost retail and hospitality segment from H2FY22 with full year pre-Covid normalised operation pushed to FY23. BEL has comfortable debt-equity and sufficient liquidity from operational commercial assets. We maintain BUY with an SoTP based target price of | 320/share (unchanged).

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