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Phase V to boost revenues in FY23…

About the stock: Nirlon Ltd (Nirlon) is in the business of development and management of commercial/IT-ITeS real estate. It owns two primary assets: Nirlon Knowledge Park (NKP), ~ 23-acre IT Park in Goregaon (East), Mumbai and also 75% of undivided interest in ~ 0.05 million square feet in Nirlon House, Worli.

* GIC Singapore is a co-promoter through its affiliate, Reco Berry Pvt Ltd (Reco) of Singapore, and currently has a 63.92% holding

Q2FY22 Results: Nirlon reported a muted performance.

* Topline at | 79.4 crore was down 0.8% YoY (up 5.7% QoQ). The occupancy slightly improved QoQ at 91.9% (vs. 90.6% in Q1), albeit down from 99.5% in Q2FY21 primarily on account of one large licensee moving out post expiry of their license, a part of which has been re-leased

* The EBITDA at | 59.6 crore, was down 2.3% YoY (up 17.6% QoQ). QoQ growth was largely due to charge of waterproofing expenses and market fees amortisation in Q1

* PAT was up 1.2% YoY (up 27.6% QoQ) at | 33.8 crore,

What should investors do? Nirlon’s share price has given a return of 91% over the past five years.

* We maintain BUY rating on the company

Target Price and Valuation: We value Nirlon at | 455/share.

Key triggers for future price performance:

* Quality Grade-A office assets and backing of Reco Berry – an affiliate of GIC

* We expect its lease revenues to grow at 34% CAGR to | 496 crore in FY21- 23E, led by incremental leasing revenues flow through from phase V

* Clarity over future growth plans as and when the company shares it, will drive further value potential

Alternate Stock Idea: Besides Nirlon, we like Mahindra Life in the realty sector.

* A play on expanding residential real estate portfolio

* BUY with a target price of | 335

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