IGI Logo

Project additions to drive valuations for next two years

* Mumbai-focused player with presence across all price points: SRIN established its brand with the BKC project, but subsequently other micro markets of MMR with different price points deepened its offering to address larger pool of homebuyers and successfully selling products with deep understanding and strong demand. SRIN devised strategy of pricing its product with respective micro markets, fetching better sales. SRIN operates under four brands in the residential segment i.e. Signature (uber luxury), Signia (Ultra luxury), Sunteck City (Premium) and Sunteck World (Aspirational affordable).

* Shahad strengthens aspirational luxury housing and adds Rs86/share to NAV: SRIN aspires to develop an aspirational luxury integrated residential township on ~50-acre land parcel in Shahad, Kalyan. While SRIN has strong portfolio in the Western suburbs of MMR, Shahad addition (10msf) strengthen portfolio in Eastern markets and take tally of business development (BD) in last two years to ~36msf (way ahead of peers). SRIN to generate gross revenues of Rs.92.5bn from project with net surplus of Rs32.9bn which is NAV accretive by Rs12.6bn (Rs86/share). (WACC @10%)

* Focus on aggressive BD in next two years creates strong pipeline: SRIN added 36msf in last two years to the portfolio in asset light model with ~75% economic interest. SRIN to aggressively scouting for projects for atleast next 2 years to take an advantage of current scenario, where buyers prefers reputed/branded and execution focused developers while smaller developers finds it difficult to monetise big land parcels due to no credit lines availability. SRIN’s BS with just 0.2x D/E allows to go extra mile to tap an opportunity as it comes. Hence, assumed SRIN to add project/s with 3msf developable area each year for next 8years. Additionally, we modeled 30% margin for the new projects (guidance +35%) at WACC 12%, and 40% NAV discount to mitigate the future risk and arrived to NAV of Rs.8.5bn.

* Low leverage and FCF from completed projects aids expansion plans: Low leverage is advantageous and SRIN has systematically reduced its debt over the years. It presently enjoys a robust position with D/E ratio of 0.21x which is best in class among listed peers having cost of debt at less than 9.5%. With SRIN on asset-light, the scope for incremental debt is low, and is well positioned to fund growth with internal accruals. Over FY20-25E, SRIN is expected to generate FCF of Rs20bn from the completed projects which is enough to fund ongoing and planned projects. We envisage SRINs D/E to remain in the 0.21x- 0.25x over the period of FY21-23E.

* Valued SRIN on the SoTP with residentials valued on an NPVbased NAV approach, capturing completed (Rs15.7bn), underconstruction (RS.15.2bn), planned (RS.55.1bn) and business development (RS.8.5bn) and reach to Rs619/share with 26% upside.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer