Buy Sunteck Realty Ltd For Target Rs.604- Yes Securities
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Launches key to achieve the presales guidance
Our view
Sunteck Realty (SRIN) continued its strong performance and achieved presales of Rs3.37bn and collected Rs2.6bn for the Q2FY23 and reiterated guidance of Rs18bn presales for FY23E. SRIN acquired ~7.25acres land parcel under JDA at Beverly ParkMira Road with estimated development potential of ~2.5msf built up area and as per SRIN’s track record company’s share should be ~70%. Management reiterated, SRIN will continue to aggressively vouch for lucrative opportunities in market for Business Development (BD) in next 12-18months supported by the best-in-class B/S with leverage as low as 0.15x by the end of Q2FY23. SRIN has strengthened its in-house execution capabilities by building the construction management team which will lead to cost savings. We have decelerated our revenue recognition estimates and aligned with the project completion timelines, hence there is EPS cut of 84% & 22% for FY23E & FY24E. We believe SRIN will leverage its brand equity and continue to aggressively scout for business development opportunities with higher margin profile in mid income and uber luxury segment which will drive the valuation going ahead along with the steady and timely execution of projects. Hence, we have valued SRIN on the SoTP with residentials valued on an NPV-based NAV approach, capturing all projects - completed (Rs14.3bn), under-construction (RS.12.3bn), planned (RS.58.5bn) and business development (RS.7.5bn). We retain our ‘BUY’ rating with a target of Rs604/share and an upside of 56%.
Result Highlights
? SRIN reported presales of Rs3.37bn grew by 24% y/y in Q2FY23 and up by 1%q/q. And collection strong witnessed growth of 16%q/q and 60%y/y to Rs3.31bn. Collection efficiency shot up to 98% in Q2FY23.
? Presales was guided by the newly launched 4 th Avenue-ODC (Rs2bn), Sunteck Beach Residences-Vasai (Rs740mn), and One World- Naigaon (Rs570mn).
? SRIN reported revenue of Rs807mn (-43.7%q/q & -40.8% y/y) for Q2FY23 and EBITDA came in at Rs100mn (77.8%q/q & -72.5% y/y) while margins dropped to 12.4% (-1909bps q/q & -1436bps y/y).
? Adj. PAT for Q2FY23 came in at Rs23mn (-90.6% q/q & -86.2% y/y) and Adj. profit margin was at 2.9%
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