Buy Prestige Estates Projects Ltd For Target Rs.404 - Yes Securities
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Result Highlights: Strong residential sales driving numbers
* PEPL achieved pre‐sales of 2.76msf (‐7%QoQ/35%YoY) for Q4FY21 which took tally for whole year to 8.16msf (25%YoY) and translates in sales value of Rs18.5bn (‐9%QoQ/53%YoY) for Q4FY21 and Rs54.6bn (20%YoY) FY21 respectively. PEPL collected Rs50.8bn (9%YoY) for FY21.
* In Q4FY21 PEPL launched two project one each in residential (Prestige Park Drive o.67msf) and commercial (Prestige Lakeshore Drive 4.07msf) segment totaling to 4.74msf.
* PEPL has deleveraged its balance sheet by using cash generated from the Blackstone transaction and currently Net D/E stands at 0.19x with Net debt at Rs.13.1bn and cost of borrowing is at 9.8%.
* PEPL added new residential project in Prestige Cosmos Mulund, Mumbai with total saleable area of 5msf and can potentially generate Rs82.5bn revenue. PEPL need to pay grossly Rs17.5bn including upfront of Rs3.7bn and required to develop 0.8msf commercial space for secured lenders.
* Income from office and retail segment for FY21 stood at Rs7.2bn while in Q4FY21 PEPL clocked Rs953mn.
Our view:
PEPL achieved best ever pre‐sales of 8.16msf for FY21 and expects to continue this momentum on the back of planned launches of ~12‐15msf in FY22. Company added one more project to the Mumbai portfolio (Prestige Cosmos with potential saleable area of 5msf). With Blackstone’s Phase‐1 transaction PEPL has deleveraged its balance sheet and net debt stands at Rs13.1bn and net D/E came down by 84% to 0.19x which is further expected to come down and PEPL to be net cash positive by Rs10bn once Phase‐2 is executed.
Additionally, company’s plans to build 44.5msf annuity asset and 6 hospitality which will yield annual rental over Rs23bn and Rs7.9bn respectively by FY26 remains intact with maintaining D/E below 0.5x. We have recalibrated our numbers for new project addition and higher deleveraging than our expectation and SoTP based NAV inches up to be Rs621/share (WACC 11.3%, Cap rate 9% and 15x EV/EBITDA FY22) while bulls case NAV is Rs679/share. We maintain our BUY rating with TP of Rs404/share (35% discount to Rs621/share considering demand risk).
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