Buy Brigade Enterprises Ltd For Target Rs.405 - ICICI Direct
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Second wave impacts sales volume…
About the stock: Brigade Enterprises (BEL) is one of the leading property developers in South India. Distinguished reputation of developing Grade-A commercial property, wide budget range of products from affordable to ultrapremium housing in real estate business and operational marquee hotel assets in hospitality segment provide an edge to the company.
Q1FY22 Results: BEL’s sales volumes were impacted by the second wave resulting in a QoQ decline.
* The company reported sales volume of 0.77 mn sq feet, strong growth of ~91% YoY and decline of 54% QoQ. Pre-sales (sales value) were up ~92% YoY (down 53% QoQ) at | 480 crore, with realisations up 5% YoY at | 6275/square feet (led by project mix and price hikes)
* On financial reported numbers, reported revenues grew 88.3% YoY to | 383 crore, down 52% QoQ, on account of weak traction in hospitality (down 63% QoQ) and weak rental revenues at | 112 crore, down 8% QoQ. Revenue recognition from real estate was at | 259.5 crore. The company reported loss of | 40.8 crore, impacted by higher depreciation & interest costs and one-off charge for stamp duty payable of | 20.9 crore
What should investors do?
BEL’s share price has grown 3.2x over the past five years (from ~| 106 in August 2016 to ~| 334 levels in August 2021).
* We maintain our BUY rating on the company
Target Price and Valuation: We value BEL at | 405/share.
Key triggers for future price performance:
* Pick-up in sales momentum in the residential business with strong pipeline of 18.1 mn sq ft ongoing projects and 1.9 mn sq ft upcoming projects
* Stable cash flows in office leasing portfolio with traction in leasing to pick up in medium term; normalisation in malls operation to add incremental growth
* Hospitality portfolio recovery led by reopening of economy
Alternate Stock Idea: Besides BEL, we like Mahindra Lifespace in real estate space
* A play on residential expanding real estate portfolio
* BUY with a target price of | 940
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