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Q3FY22 sales: Recovery continues

Sunteck Realty (SRL) clocked INR3.5bn in pre-sales in Q3FY22 (up 29% QoQ/flat YoY). We believe this is a reasonable performance considering no project launches during the quarter. 9MFY22 sales at ~INR8bn are up 23% YoY. Collections during Q3FY22 rose 7% YoY/30% QoQ to INR2.7bn.

We expect a higher sales trajectory for SRL going ahead with the housing cycle likely turning, sustained expansion in project portfolio (~23msf added over the last 18 months), potential launch of the Vasai project and an additional tower/phase in Naigaon. Maintain ‘BUY’ with a target price of INR592/share.

Decent performance

New sales value was flat YoY at INR3.5bn during Q3FY22; it was up 29% QoQ. The company released some new inventory in the ODC project during the quarter. 9MFY22 sales at ~INR8bn are up 23% YoY (FY21 bookings were at ~INR10.2bn).

Collections stay strong

SRL reported collections of INR2.7bn during the quarter, up 7% YoY; they were up 30% QoQ. 9MFY22 collections at ~INR6.5bn are up 41% YoY (FY21 collections were at ~INR7.8bn). We expect collections’ trajectory to remain strong, aided by SRL’s strong execution track record.

New launches, cash flows and debt remain key variables

The company added five projects (Vasai, Vasind, Borivali, Kalyan and Pen-Khopoli) totalling ~23msf since the advent of the pandemic, leveraging the asset-light model (refer to Kalyan project addition boosts prospects). Launch of new projects is critical to boosting the sales momentum going ahead, in our view. We expect the launch of the Vasai project and the Naigaon Phase 3 project over the next couple of quarters and the Borivali and Kalyan projects by CY22 end. We also believe SRL’s focus on cash flow management should keep its balance sheet healthy going ahead.

Outlook and valuation: New launches key; maintain ‘BUY’

As highlighted in our comprehensive sector report, Real Estate - The Charge of the Consolidating Brigade, RERA-driven consolidation is throwing up growth opportunities for organised players such as SRL. We like SRL’s diversified presence in the Mumbai Metropolitan Region (MMR) and robust execution capabilities.

Revival in housing demand (refer to Hot Property - Rising like a phoenix) and SRL’s focus on cash flowsshould hold it in good stead. The company’s low gearing provides room to leverage its balance sheet and capitalise on attractive land purchase opportunities to grow its NAV. New project launches are a key stock catalyst, in our view. Maintain ‘BUY/SN’ with a target price of INR592/share (on a par with NAV of INR592).

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