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On track to achieve guidance, focusing on BD

Our view

Prestige Estates Projects (PEPL) continued strong pre-sales by achieving over Rs25bn in Q3FY23 and collected Rs23bn while launched 4.06msf across segments and geographies. Also delivered 11.04msf of projects in Bangalore & Kochi. PEPL is geared up to launch another 10-15msf of residential projects across geographies in next 3- 6months. PEPL is confident to achieve Rs120bn presales guidance (9MFY23 Rs90.4bn) as the company has already done presales of ~Rs10bn in Jan’23. PEPL is evaluating potential projects/land parcels in MMR to bolster its presence and NCR/Pune to expand geographically. PEPL launched Prestige Ocean Pearl, Calicut and registered presales of Rs2025mn within few days of launch indicating strong brand recall in newly launched geography. PEPL in next 4-5years is expected to add Rs24.7bn and Rs5.4bn annuity from office and retail projects respectively with a balance capex of Rs159bn.

Taking the cognizance of PEPL’s current sales run rate we have accelerated our estimates for the residential segment. For Q3FY23 Net D/E was at 0.42x with a net debt of Rs41.7bn. Company to use 60:40 approach of own contribution to debt funding for the balance of capex projects which will allow PEPL to maintain Net D/E below 0.5x aided by the strong cashflow from residential projects. We remain confident on PEPL’s performance with sustained demand in residential, diversifying to newer markets, increased traction in leasing and recovery in retail & hospitality. We valued PEPL on SoTP based target 1xNAV of Rs617/share at WACC 12.1%, Cap rate 9% and 15x EV/EBITDA Avg. FY24E.We retain our ‘BUY’ rating.

Result Highlights:

* PEPL achieved pre-sales of Rs25.2bn (-28.3% q/q & -41% y/y) with the volume of 2.91msf (-36% q/q & -47.8% y/y) predominantly guided by the strong sales from Bangalore, Mumbai Hyderabad & Calicut. And collected Rs22.9bn (-11.9% q/q & - 5.7% y/y) in Q3FY23.

* PEPL launched projects across segments with total developable area (TDA) of 4.06msf while delivered projects with TDA of 11.04msf.

* For Q3FY23, PEPL reported revenues of Rs23.2bn (62.3% q/q & 74.5% y/y) guided by delivery of 11.04msf of projects. ? EBITDA at Rs5.7bn (55.8% q/q & 56.7% y/y) and

* EBITDA margin came in at 24.8% (-104bps q/q & -282bps y/y). And recorded adj. PAT of Rs1.3bn (-9.2% q/q & 45.2% y/y).

* Office/Retail/Hospitality/service/residential reported revenues of Rs556mn/ 168mn/1698mn/1934mn/17703mn with EBITDA margin of 56%/40%/38%/ 13%/19% and reported PAT of Rs134mn/(166mn)/5mn/123mn/1561mn for Q3FY23.

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