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On its way to deliver another record fiscal

GPL’s FY22 annual report highlights: a) its target to achieve pre-sales of INR100b, driven by a very robust launch pipeline; b) leveraging its strong Balance Sheet to pursue business development; and c) continued adoption of sustainability measures.

Takeaways from the Chairman’s letter

* GPL for the first-time achieved sales bookings of USD1b, ending FY22 with a booking value of INR78b, up 17% YoY.

* NCR generated sales of INR32b, representing 41% of overall bookings. GPL has significant upcoming launches in this market in FY23, including its premium project at Ashok Vihar, Delhi.

* The management’s aims to achieve INR100b of sales in FY23, which will translate in 27% YoY growth. GPL also aims to deliver another record fiscal in terms of collections and cash flows.

* One of the big focus areas in FY23 will be business development. Despite the ongoing recovery in the sector, a large number of developers continue to face liquidity pressures, which creates a conducive environment for business development.

* In FY22, GPL signed seven projects with a development potential of 9msf. It endeavors to deliver the best ever fiscal from a business development perspective.

Performance review in its core markets

* NCR continues to outperform GPL’s core markets: The NCR market remains the highest contributing region for GPL in FY21-22, with another fiscal of record sales, backed by a strong response to the launches and healthy sustenance sales.

* GPL booked 3.9msf (up 47% YoY) in NCR, with a booking value of INR32b, up 70% YoY. The strong performance was backed by new project and phase launches, and continued healthy sales from existing inventory.

* Pune: GPL registered its highest ever sales in the Pune market in FY22, with bookings of INR18b spread over an area of 3msf. Godrej Hill Retreat, Mahalunge was a top contributor in the Pune region, clocking sales of ~0.7msf, with a booking value of INR4b.

* Bengaluru: GPL recorded soft sales in the Bengaluru market in FY22, despite two launches, due to limited unsold inventory, with sales of 1.6msf and a booking value of INR6.7b. The management expects a strong sales rebound in Bengaluru in FY23, with a healthy pipeline (7msf) of new projects and phase launches.

* MMR: Total sales in MMR stood ~1.4msf, with a booking value of INR17b, up 12% YoY. This performance was achieved with two new project launches in FY22 and healthy sales traction from GPL’s existing projects.

Strong launch pipeline

* GPL has outlined a project pipeline of 21msf to be launched in FY23, including the launch of some key projects in MMR (Wadala, Thane, and Matunga) and NCR (Ashok Vihar)

* In FY22, it has singed seven projects with a development potential of 9msf. GPL is in advanced stages of closing a few more deals in the near term. With INR47b of surplus cash and INR74b expected to be generated over the next four years, we expect the momentum in business development to continue.

Key financial highlights

* P&L highlights: Revenue from operations grew 138% YoY to INR182b, driven by completion of 6.4msf across seven projects in its core markets. Other income grew 34% YoY to INR7.6b on the back of a 21% rise in interest income to INR6b. EBITDA stood at INR1.3b as against an operating loss of INR2.3b in FY21. It reported a PAT of INR3.5b v/s a loss of INR2.5b in FY22.

* Debt: Gross debt of INR52b includes:

   * Long-term borrowings of INR10b in the form of unsecured debentures, carrying an interest rate of 7.5% and maturing in Jul’23.

   * Short-term borrowings of INR42b in the form of working capital and overdraft facilities, carrying an interest rate of 4.2%-7.7%.

* Liquidity: In addition to a cash and bank balance of INR13b, GPL also has liquid investments amounting to INR33.6b. Thus, resulting in a net debt of INR5b.

Valuation and view

* We have tweaked our project completion assumption, resulting in a (20%)/10% and (23%)/5% change in our FY23/FY24 revenue and PAT estimate, respectively.

* While we are confident of: 1) the company delivering 25% pre-sales CAGR over the next two-to-three years, given its pipeline of ~95msf; 2) strong business development, aided by its existing cash balance and surplus cash flow generation potential, 3) concerns over its ability to strengthen its MMR portfolio, and 4) generation of profit from its historical JVs still loom over.

* We had lowered our TP to INR1,300 in our 1QFY23 strategy preview note to incorporate higher risk free rate and lower terminal growth assumption (to 3% from 5%) as we await further clarity on the business development front beyond FY23. Reiterate Neutral rating on the stock.

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