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Strengthening presence in South India

Operating performance encouraging Brigade Enterprises

(BRGD IN) FY24 presales increased 46% YoY, aided by 5.6msf of new launches and improving average realization – Q4FY24 presales rose 31% YoY, narrowing the gap versus peers in the home market. We expect further levers to average realization and profitability, aided by new land acquisitions by the developer in Bengaluru in FY24. This is likely to command an average pricing of ~INR 10k/sf (INR 8.2k/sf in Q4FY24). Core free cash generation for Q4 came-in strong at INR 5bn, sustaining full-year cash generation at INR 12bn. Also, strong performance has been delivered outside the residential segment in FY24. Annuity portfolio is witnessing a net absorption of >1msf and Hospitality segment achieved an average occupancy of 72% (+3ppt YoY) along with higher average room rate (ARR), up 8% YoY.

Plugging the gap in land reserves

BRGD has beefed-up its land reserves, led by new project additions of >17msf in FY24, accounting for c.30% of its overall landbank (in msf). Notably, ~90% of the new business development (BD, in msf) is outside the home market and Chennai forms >55% of the overall mix. Overall, BRGD consistently garnered ~4% residential absorption market share in Bengaluru in the past 3-5 years and scaling outside the home territory, mainly Chennai, offers levers to sustain the strong presales momentum

Valuations: Recommend Accumulate with Mar ’25E TP of INR 1,350

We arrive at our Mar ’25E SoTP-TP of INR 1,350 via a blended methodology – We value the residential / development business using the average of NAV premium and multiple-based (EV/EBITDA) valuation. We value the rental portfolio (33% of GAV) based on a 7.5% cap rate on exit and the hospitality assets (17% of GAV) at 20x EV/EBITDA exit multiple. Key upside risks to earnings and TP include higher sales velocity in new launches, margin-accretive land acquisition, visibility on new segments (warehousing/ industrial), higher FSI for existing and upcoming commercial projects and multi-regional expansion. Key downside risks include incorrect capital allocation and product offerings.

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SEBI Registration number is INH000000933