IGI Logo

Southern comfort

FY22 was another challenging year for Brigade Enterprises’ (BRGD) with Covid
impacting the leasing and hospitality segments in H1FY22. However, the company
clocked a resilient performance with FY22 residential sales of 4.7msf worth
Rs30.2bn (up 9% YoY in value terms) and also reduced its share of net debt by
Rs9.0bn YoY to Rs17.5bn as of Mar’22 aided by a QIP fund raise of Rs5.0bn in
Q1FY22. The company’s liquidity position is comfortable and we expect BRGD’s
share of rental NOI to grow at 20% CAGR over FY22-25E to Rs6.8bn along with
continued traction in residential sales and revival in hotels. We reiterate our BUY
rating with a revised target price of Rs595/share (earlier Rs573) as we roll forward
to Mar’24 NAV. Key risks are prolonged weakness in office leasing and slowdown
in residential demand.

* Residential sales to see continued traction: While company has ~8msf of new
launches lined up in FY23, Q1FY23 saw launches of just 0.51msf across two projects
in Bengaluru. With another 9.5msf of residential launches lined up mainly in
Bengaluru and one project each in Hyderabad and Chennai (7.6msf of apartments
and 1.9msf of plots), over remainder of FY23 and H1FY24, we model for sales
bookings of Rs36.5bn in FY23E (company guidance is for 20% FY23E volume growth
and sales value of ~Rs40bn), Rs43.4bn in FY24E and Rs51.1bn in FY25E. Launch of
the Chennai luxury project at Mount Road in H2FY23/FY24E remains a key
monitorable.

* Strong rental NOI CAGR of 20% over FY22-25E: During the year, the company witnessed demand revival in the leasing vertical and leased ~1msf with an active pipeline of ~1msf. Office space renewals stood at ~0.5mn sft at 14% escalation. Retail revenue increased by 64% during FY22 over FY21. Hence, the company achieved FY22 rental NOI of Rs3.9bn vs. Rs2.9bn in FY21. The company’s focus remains on incremental leasing and it is targeting to lease out vacant space of 1.7msf across assets by Mar’23. We expect BRGD to clock 20% rental NOI CAGR over FY22-25E to Rs6.8bn owing to incremental rentals from Tech Gardens, Bengaluru and Brigade Twin Towers office project becoming fully operational in FY25E.

* Hotels segment seeing strong recovery: BRGD’s hotel revenue increased by 58% YoY in FY22 to Rs1.8bn owing to waning of Covid impact. Post the Omicron wave in Q4FY22, the company saw ARRs across its hotel portfolio recover to pre-Covid (Q1FY20) levels of Rs5,363 in Q1FY23 with portfolio occupancy of 71% (1,200bps higher than pre-Covid) leading to Q1FY23 hotel EBITDA of Rs291mn at an EBITDA margin of 32%. We expect BRGD’s hotel business to clock an EBITDA of Rs1.0bn in FY23E and Rs1.2bn in FY24E vs. Rs0.9bn in FY20.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer