Buy Prestige Estates Projects Ltd For Target Rs.621 - Yes Securities
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Robust Residential sales and launches to aid annuity CAPEX with net gearing under 0.6x
Our view
PEPL recorded best pre-sales in its history crossing Rs21bn in single quarter and delivered 8.08msf while launched cumulatively 3.49msf in Q2FY22 across the geographies of operation. PEPL further increased depth of Mumbai portfolio by acquiring residential project from ARC confirms long terms play. PEPL plans to commission annuity assets of 49.3msf (Cos. shares 33.5msf) which will take currently annuity of Rs3.6bn to 10x in next 6-7years (excluding hospitality); Mumbai assets will act as catalyst. Management also reiterated, will not allow Net D/E to cross 0.6x in long run although most of capex is yet to spend which reaffirms our confidence on PEPL.
Result Highlights
* In Q2FY22 achieved record presales of Rs21.1bn up by +88%y/y (188% q/q) driven by strong volumes of 3.56msf (224%q/q & 101%y/y) backed good response for prestige city. Collected Rs15.5bn (52%q/q & 35%y/y) and launched 3.49msf in quarter while plans to launch 10msf in next 4months.
* PEPL reported revenues of Rs13.5bn (-5%q/q & -28%y/y) on the back of 8.08msf delivery and annuity of Rs779mn in Q2FY22. Reported EBITDA at Rs3.9bn (- 13%q/q & -27%y/y) while EBITDA margin has improved to 29.1% by 475bps q/q and 61bps y/y on the back of product mix and incremental contribution from annuity. In Q2FY22 recorded adj. PAT of Rs966mn (-10.2%q/q & -8.8%y/y) due to incremental interest expense.
Valuation
We remain confident on PEPL’s performance with robust pent-up demand in residential, increased traction in commercial leasing and recovery in hospitality. We keep our estimates unchanged and value PEPL on SoTP based target 1xNAV of Rs621/share at WACC 11.3%, Cap rate 9% and 15x EV/EBITDA FY22 by removing 35% discount earlier given to NAV as most of the peers are trading at 1.3x-1.5x premium to NAV. We maintain our ‘BUY’ rating.
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