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Falcon to focus on Pune & NCR market now

Our view

Prestige Estates Projects (PEPL) continued strong pre-sales by achieving over Rs30bn in Q1FY23 and collected Rs21.46bn while launched 9.67msf across Bangalore & Mumbai. Post PEPL’s successful launch in Mumbai, is geared up to launch more projects in reminder of FY23. Additionally, PEPL is evaluating potential projects/land parcels in NCR and Pune to expand geographically. PEPL’s annuity is expected to rise with the commissioning of 5msf office assets over FY23-24 along with two retail malls in Bangalore & Kochi with TDA of 2.33msf. PEPL aspires to clock presales ~Rs120bn for FY23. For Mumbai’s commercial portfolio, PEPL with all approvals, construction has started and is expected to complete in 4years. Management reiterated Net D/E to remain below 0.5x in long run although most of capex is yet to be spend which reaffirms our confidence on PEPL. We remain confident on PEPL’s performance with sustained pent-up demand in residential, increased traction in leasing and recovery in retail & hospitality. We valued PEPL on SoTP based target 1xNAV of Rs655/share at WACC 11.4%, Cap rate 9% and 15x EV/EBITDA FY23.We maintain our ‘BUY’ rating.

Result Highlights

* PEPL clocked presales value of ~Rs30.12bn (-7.9% q/q & 310% y/y) with the volume of 3.63msf (-25.2% q/q and 230% y/y) in Q1FY23 and collected Rs21.46bn (-12.8% q/q & 110% y/y) with the new launches of 5.42msf and completions of 0.38msf. Bangalore and Mumbai portfolio contributed Rs20.1bn & Rs7.38bn respectively (cumulatively 91% of total presales).

* For Q1FY23, PEPL reported revenues of Rs19.4bn (-19.2% q/q & 36.9% y/y) guided by the recognition of Jindal City project (OC received).

* EBITDA at Rs4.6bn (-7.6% q/q & 33.7% y/y) and EBITDA margin came in at 23.8% (301bps q/q & -58bps y/y). And recorded adj. PAT of Rs2.54bn (-73% q/q & 135.7% y/y) due one-off adjustment for asset sale.

KEY PRESENTATION & CON-CALL HIGHLIGHTS

Residential

 In Q1FY23, four projects were launched spanning 9.67msf i.e. Prestige Tech Forest & Prestige Waterfront (both commercial), The Prestige City Meridian Park Phase-II in Bangalore; and The Prestige City Mulund-Bellanza in Mumbai.

* Three projects totaling 0.78msf i.e. Prestige Woodland Park, Prestige Metropolitan, and Prestige D’Art were completed in Q1FY23.

* Of total sales, 67% was contributed by Bangalore and 24% was contributed by Mumbai while rest was contributed by Hyderabad, Chennai, Kochi, Goa & Mangalore.

* PEPL spent Rs14.72bn on construction in Q1FY23 wherein Rs11.27bn spent on residential & assets for commercial sales while on commercial spent Rs2.18bn, Retail Rs770mn and on hospitality spent Rs500mn.

* PEPL has tied up with Shiv Shahi Society, Mumbai for redevelopment and has GDV of Rs30- 35bn.

* From Mumbai portfolio PEPL plans to launch Daffodils, Pali Hill & Ocean Towers, Marine lines in FY23 along with subsequent phases in The Prestige City, Mulund. And expects to achieve sales of Rs25-30bn from Mumbai portfolio in FY23. While overall GDV of Mumbai portfolio is ~Rs180bn cumulatively post recent launches.

* Gross debt by the end of Q1FY23 was Rs56.4bn while Net debt was Rs39.2bn with average cost of borrowing of 9.40%. And Debt to equity ratio is at 0.4x.

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