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Strong launch pipeline ahead…

About the stock: Brigade Enterprises (BEL) is one of the leading property developers in South India. Its offerings include Grade-A commercial property, affordable to ultra-premium housing in real estate business and operational marquee hotel assets in the hospitality segment

Q3FY22 Results: BEL’s performance was a mixed bag

Brigade Enterprises reported sales volume of ~1.1 mn sq ft, reporting a decline of ~29% YoY, mainly due to delays in approvals for planned projects in Bengaluru. Presales were down ~26% YoY at | 684 crore, with realisations up ~4% YoY at | 6,281/sq ft

On the financial front, reported revenues grew ~42.9% YoY to | 921 crore on account of higher revenue recognition from real estate at | 703 crore, up 30.6% YoY. Revenues from hospitality were up 105% YoY at | 62.6 crore with rental revenues at | 167.4 crore, up 22.6% YoY. EBITDA margins were up 493 bps YoY to 28%. PAT was at | 78.4 crore

What should investors do? BEL’s share price has grown ~4.4x over the past five years (from ~| 113 in January 2017 to ~| 506 levels in January 2022)

We maintain our BUY rating on the company. Apart from robust residential sales volumes traction, we expect a recovery in commercial and rebound in retail/hospitality to provide the next leg of upsides

Target Price and Valuation: We value BEL at | 600/share.

Key triggers for future price performance:

Traction in sales momentum in the residential business with strong pipeline of 16.8 mn sq ft ongoing projects and ~2.4 mn sq ft upcoming projects over next 2 quarters & further ~6-7 mn sq ft launch pipeline by FY23 end

Stable cash flows in office leasing portfolio with traction in leasing to pick up in near to 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 | 335

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