Accumulate Brigade Enterprises Ltd for Target Rs 700 by Elara Capital
Weak print
Brigade Enterprises (BRGD IN) Q1FY27 presales came in at INR 10.6bn, down 5% YoY and 58% QoQ, on account of slippages in launches. This drove a weak core residential OCF (estimate) print of INR 0.41bn. Presales guidance for FY27 remains intact at INR 90bn, up 20% YoY, anchored on ~12.4mn sqft of residential launches for the next four quarters, amounting to a GDV of INR 134bn. Annuity performance remains healthy, with leasing revenue up 9% YoY and EBITDA margin stable at 70%, while hospitality saw near-term disruption from the West Asia conflict, dragging food & beverage (F&B) and Meetings, Incentives, Conferences and Exhibitions (MICE); however, Average Daily Rate (ADR) and PAT remain strong. Overall, BRGD offers a play into real estate in South India, with a well-diversified exposure across segments, but the stock outperformance hinges on expansion beyond a single region. Profitability and cashflow trends in the residential segment are key monitorable as the developer plans on bringing 10.0mn sqft of annuity portfolio in the next 4-5 years for a total capex of ~INR 60bn. Retain Accumulate.
Absence of launches drag presales:
Q1FY27 presales of INR 10.6bn declined 5% YoY and 58% QoQ off the elevated Q4FY26 base, with residential presales at INR 10.5bn stable YoY, while commercial fell 86% YoY to INR 0.1bn. Bengaluru led residential presales at 58%, followed by Chennai at 28% and Hyderabad at 14%. No residential launches were undertaken in Q1; ~12.4mn sqft is planned for the next four quarters (GDV: INR 134bn) across Bengaluru, Hyderabad, Chennai, and Mysuru – ~2.4mn sqft in Q2, ~7.0mn sqft in H2 and ~3.0mn sqft in Q1FY28. Morgan Heights remains excluded pending State Environment Impact Assessment Authority (SEIAA) clearance, while Cornerstone Utopia Phase 2, Devanahalli and Kengeri provide additional Bengaluru optionality. Management expects sales velocity to improve from Q2 as launches come through, supporting FY27 presales guidance of INR 90bn, up 20% YoY.
Core residential OCF remains weak while annuity capex commitments high:
Total collections in Q1FY27 grew 7% YoY to INR 18.6bn, with real estate collections at INR 13.5bn, up 8% YoY and leasing at INR 3.4bn, up 10% YoY. Consolidated OCF increased 10% YoY to INR 3.5bn, while core residential OCF stood at ~INR 0.4bn. Capex commitment on ongoing leasing and commercial projects stood at INR 48.1bn, with INR 36.0bn balance to be incurred, primarily across WTC & Orion Mall Hyderabad and Brigade HRC Atrium. The company continues to scale its annuity portfolio, with ~5.6mn sqft of ongoing leasing projects on BRGD's share and ~2.6mn sqft of the upcoming commercial projects, providing further visibility on future rental income. Management says slower conversion of large-ticket leasing demand at WTC Bengaluru, with 100,000-200,000 sqft Request for Proposal. (RFPs) being deferred, while current leasing is focused on smaller 20,000-40,000 sqft format. Overall, occupancy in the annuity portfolio (8mn sqft GLA) stands at 88%.
Retain Accumulate with revise March 2027E TP of INR 700 adjusted for bonus issue:
BRGD offers a play at South India real estate with a well-diversified exposure across segments. Strengthening footprints atHyderabad and Chennai is a key positive, accounting for >40% of the upcoming pipeline. In this cycle, reach expanding to several regions would be key for outperformance. We retain Accumulate with a revise March 2027E SOTP-based TP of INR 700 from INR 900 adjusted for 1:3 bonus issue.Residential accounts for ~54% of target GAV. Our estimates are largely unchanged.
Please refer disclaimer at Report
SEBI Registration number is INH000000933
