Buy Sunteck Realty Ltd For Target Rs.673 - Yes Securities
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High on BD, Launches and Execution key monitorable
Our view
SRIN acquired new project in Penn-Khopoli with the saleable area of 6msf on asset light model with company’s share upwards of 75%. With this acquisition SRIN entered in new product line of holiday homes and plans to do plotted development (luxurious bungalows). We believe SRIN will continue to aggressively vouch for lucrative opportunities in market for business development as supported by the best in class balance sheet with leverage as low as 0.19x by the end of Q2FY22. SRIN is also focusing to strengthen its in-house execution capabilities by building the construction management team which will lead to cost savings.
Result Highlights
* SRIN in Q2FY22 clocked sales of 0.32msf (400units) translates in Rs2.72bn value and collected Rs2.1bn. Company launched Vasind project in the quarter which has received soft response. Presales to collection ratio decline in quarter from 84.8% to 68.4% due to slower construction activity because of extended monsoon.
* SRIN reported revenue of Rs1.36bn (47%q/q & -7.3% y/y) on the back of the collection of Rs2.1bn.
* EBITDA came in at Rs365mn (77.1%q/q & 23.5% y/y) backed by the 26.8% EBITDA margin higher by 455bps q/q and 668bps y/y aided by the ~70% collections from the Uber, Ultra & Premium Luxury projects.
* Reported adj. PAT of Rs153mn (403.7%q/q & 34.8% y/y) aided by the higher other income and operating margins. Adjusted Profit margin came in at 11.2% (793bps q/q & 350 bps y/y)
Valuation
We believe SRIN’s is in expansion mode and will continue to aggressively scout for business development opportunities for alteast two years 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 (Rs15.8bn), under-construction (RS.15.2bn), planned (RS.62.9bn) and business development (RS.8.5bn). We upgrade our target to Rs673/share (earlier Rs619/share) and maintain our ‘BUY’ rating with an upside of 38% upside.
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