Buy Sunteck Realty Ltd : Sunteck 3.0: Asset‐light play aimed at fast monetization and higher market share By Yes Securities
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Buy Sunteck Realty Ltd For Target Rs.443
Sunteck 3.0: Asset‐light play aimed at fast monetization and higher market share
In recent years, Sunteck Realty (SRIN) has successfully launched, sold and executed projects across all price points, thereby increasing its brand visibility and winning a bigger pie in micro‐markets of its presence. Additionally, SRIN has secured first mover advantage in most projects.
Its asset‐light model ensures a lean balance sheet (FY21‐ D/E:0.21x) which we believe would stay intact in coming years. Given the ‘SUNTECK 3.0’ strategy of asset‐light expansion, low leverage, consistent project wins, and organized and execution‐focused development coupled with recovery in residential demand, SRIN would further increase its market share.
Hence, we have valued SRIN on the SoTP with residentials valued on an NPV‐based NAV approach, capturing all projects ‐ completed (Rs18.2bn), under‐construction (RS.20.4bn), planned (RS.26.1bn) and business development (RS.4.1bn). We initiate coverage on SRIN with ‘BUY’ rating and target price of Rs443/share (WACC 10%) implying an upside of 46% upside.
Result/Concall Highlights:
* Pre‐sales for Q4FY21 stood at Rs3,710mn compared to Rs3,492mn in Q3FY21. For FY21, presales stood at Rs10,217mn Vs 12,000mn in FY20.
* Company reported highest ever quarterly collections of Rs3,210mn in Q4FY21 compared to Rs2,525mn in Q3FY21. (Rs7,796mn in FY21) Net debt for FY21 stood at Rs4,978mn and Net debt/Equity was 0,24x
* For FY21, sales composition was: ODC‐47%/Naigaon‐21%/BKC‐9%/Others‐23%
* SRIN to launch 2 out of 3 new acquired projects i.e. Vasai, Vasind & Borivali. These launches will be in the range of ~Rs5bn. Management deferred from giving any guidance, but they are confident of achieving exponentially high growth in coming years.
* Current project level margins of company stand at ~25% and management expect the same to expand to 35% with new projects in portfolio over coming years.
* The BKC inventory (~Rs17bn) is estimated to get exhausted in coming 3‐4 years.
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