Buy Sunteck Realty Ltd For Target Rs. 476 - Yes Securities
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Our view: New launches and BD to gather pace in coming quarters
* Sunteck Realty (SRIN) did pre-sales of Rs1.76bn (-53%QoQ/74%YoY) which was driven by 80% contribution from ODC and Naigaon project. Also collected 1.72bn (-46%QoQ/165%YoY) on the back strong execution. The presales to collection ratio further firm up to 98% in Q1FY22 from 76% in Q4FY21.
* SRIN will be pre-paying premiums to the tune of ~Rs2.5bn between Oct-Dec 2021 thus will be saving similar amount and ROE on these payments is well over 35%.
* Gross cashflow for the quarter stood at Rs320mn against Rs23mn in Q1FY21. Adjusted Net Debt/Equity came in at 0.2x.
* We have kept our estimates unchanged while taking the cognizance of SRIN’s new dna of fast execution and quick monetization of projects along with aggressive acquisition of new projects in asset light mode, we have reduced the discount given to planned project from 35% to the 25% and valued at Rs30.1bn translating to Rs205/share. Additionally, we have reduced discount on business development from 50% to 40% and hence valued at Rs4.9bn translating in Rs33/share.
* We have arrived at SoTP based NAV of Rs476/share (previous TP443) considering net cashflows from completed, ongoing, planned projects and expected business development. We maintain ‘BUY’ rating on stock.
Result Highlights:
* SRIN clocked revenue of Rs927mn (-51.5%QoQ/68.7%YoY) and was driven by collections of Rs1.72bn in Q1FY22.
* Company incurred cost of Rs1.02bn in Q1FY22 where lion’s share of 85% is taken by ODC and Naigaon.
* Reported EBITDA of Rs206mn (-41.6%QoQ/32.3%YoY) and margin seen uptick of 376bps sequentially to 22.2%. And adjusted profit came in at Rs44mn (- 55.6%QoQ)
* Both BKC commercial projects is expected to complete in next 18-20month. And Avenue 2 is expected to be delivered in Aug/Sept -21. Naigaon West World is expected to get OC in Q3FY22.
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