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All eyes on upcoming launches

As per Sunteck Realty’s (SRIN) Q4FY21 operations update, after a tepid H1FY21, the company has clocked robust sales bookings of Rs3.7bn in Q4FY21 as well (up 6% QoQ) along with record quarterly collections of Rs3.2bn. With sales momentum sustaining for completed/launched inventory, SRIN is targeting to launch the Naigaon Phase III and Vasai/Vasind projects in FY22E which is expected to boost sales in FY22-23E. We maintain our BUY rating on SRIN with a revised target price of Rs443/share (earlier Rs437) based on 1x NAV. The change in our target price is driven by including value of new Borivali project addition and exclusion of Andheri West project as the JDA agreement with the landowner has been cancelled. Key risks to our call are slowdown in the Mumbai property market volumes and fall in residential/commercial prices.

* Strong end to FY21 sales bookings and collections:

SRIN’s Q4FY21 sales bookings of Rs3.7bn were up 6% QoQ driven by continued momentum in ODC, Goregaon project (Rs2.0bn), BKC projects (Rs0.9bn) and Naigaon (Rs0.8bn). SRIN also achieved record quarterly collections of Rs3.2bn in Q4FY21 with ODC, Goregaon (Rs1.0bn), BKC projects (Rs0.5bn) and Naigaon (Rs0.9bn) being the major contributors. While H1FY21 sales bookings of just Rs3.0bn were impacted by Covid, the strong bounce back in H2FY21 with sales bookings of Rs7.2bn has enabled SRIN to report FY21 sales bookings of Rs10.2bn (down 16% YoY) and collections of Rs7.8bn (up 9% YoY).

* Slew of launches targeted in FY22E:

As per SRIN’s management, in light of the sales momentum sustaining for completed/launched inventory, the company is targeting to launch the Naigaon Phase III and Vasai/Vasind projects in FY22E which is expected to boost sales in FY22-23E. In addition to these upcoming launches, the company also has an estimated unsold inventory of Rs13bn in ODC, Goregaon project (Rs9-10bn in Avenue 4 and balance in completed/nearing completion Avenue 1 and 2 phases) and Rs5bn in the Naigaon Phase 1 and 2 affordable housing project. Apart from its existing portfolio of projects, the company continues to pursue business development opportunities through an asset light JDA model. Over the long term, SRIN’s affordable housing projects are expected to contribute 50% of sales bookings.

* Borivali project acquisition an additional positive:

SRIN has recently acquired a 7acre land parcel in Borivali West (Mumbai’s Western suburbs) on JDA basis where it will have an effective 72% revenue share in the development of a luxury residential project with a saleable area of ~1msf. Assuming a launch price of Rs14,000/psf in FY22E and construction cost of Rs5,000/psf with 5% YoY escalation in selling price and costs, we estimate NAV accretion of Rs2.7bn (Rs 19/share) from this project.

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