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Strong pre-sales guidance backed by launch pipeline

Our view

Sunteck Realty (SRIN) continued its strong performance and achieved presales of Rs5.4bn; collected Rs3.3bn for the Q4FY23 and guided for 20-30% growth for FY24E. SRIN plans to launch the Kalyan project (10msf) in FY24 while launched Mira Road project in Mar-23. Additionally, plans to launch subsequent phases in Naigaon & ODC. Management reiterated that SRIN will continue to aggressively vouch for lucrative opportunities in market for Business Development (BD) in MMR (city centric) under uber luxury and midincome group. In Q4FY23, SRIN pre-leased Sunteck-BKC51 (~Rs300/sft/month) fully and will handover for fit-outs in Aug-23. SRIN plans to pre-lease and deliver Sunteck Icon as well by Q2FY24.

Two office assets are expected to generate annuity of ~Rs700mn from FY25E. Company has gross debt of Rs5.9bn while net debt of Rs2.8bn and adj. net D/E came down to 0.13x as of FY23. SRIN in the last few years displayed the impeccable track record of acquiring projects and ramped up the execution capabilities post addition of Naigaon project along with efficiently managing lean B/S. We believe going ahead valuation will be determined by the pace at which SRIN will acquire the project, monetize and deliver it. We have valued SRIN on the SoTP with residentials valued on an NPV-based NAV approach, capturing all projects - completed (Rs9.7bn), under-construction (RS.12.7bn) and planned (RS.57bn). We retain our ‘BUY’ rating with a revised target of Rs500/share and an upside of75%

Result Highlights:

* SRIN reported pre-sales of 0.46msf translates in value of Rs5.37bn grew by 6.8% y/y in Q4FY23 and up by 35.6%q/q. And collection witnessed decline of 18.3%y/y but grew 8.6% q/q to Rs3.3bn. Collection efficiency was 61% in Q4FY23 as launches were towards the end of quarter. For FY23 SRIN achieved pre-sales of 1.48msf translates into Rs16bn (23% y/y) and collected Rs12.5bn (19% y/y).

* Presales guided by Sky Park, 4 th Avenue, Sunteck Beach Residencies (SBR), and sustained sales in Naigaon, Pearl and Island (contributed 89% of presales).

* SRIN reported revenue of Rs489mn (-45.3%q/q & -68.7% y/y) for Q4FY23 and reported an EBITDA loss of Rs91mn. Reported Adj. PAT loss of Rs279mn. While for FY23 the company reported revenue of Rs3.6bn (-29.4% y/y), EBITDA Rs642mn (-32.7% y/y) and Adj. PAT of Rs14mn (-94.4% y/y).

* SRIN is geared up to launch ~8msf in FY24E which will guide the company to achieve targeted pre-sales growth of 20-30% CAGR.

* Company generated gross operating surplus of Rs4.3bn and net operating cashflow of Rs2.6bn in FY23.

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