Buy Aditya Birla Real Estate Ltd for the Target Rs 1,750 by Emkay Global Financial Services Ltd
We upgrade Aditya Birla Real Estate (ABREL) to BUY from Add, while maintaining TP at Rs1,750, based on 6x EV/embedded EBITDA, at 23% premium to the NAV (currently, the stock is trading at 1% premium to the NAV). While ABREL saw muted business development (BD) in FY26, significant BD uptick is expected in FY27 with one deal (GDV: Rs26bn) already closed. With sale of the paper business concluding and ABREL having received Rs33bn (out of the Rs35bn deal-size), it has a large war chest for business development. 1QFY27 pre-sales performance was muted at Rs3.3bn (down 22% yoy), due to no new launches and limited inventory for sustenance sales. But as ABREL has a launch pipeline of Rs96bn for the remaining year and with launches bunched up in 2HFY27, we expect pre-sales to be flat at ~Rs80bn in FY27E (FY26 presales: Rs81.4bn). However, with BD set to gain traction in FY27, we expect a significant pre-sales build-up for FY28e. Key monitorables are business development and launch of Niyaara Phase-3.
1QFY27 snapshot – : Muted performance Operational:
Pre-sales value in the quarter was Rs3.3bn (down 22% yoy) vs our estimate of Rs8.0bn. Although gross sales stood at >Rs7.0bn, cancellation in Niyaara and Arika led to much lower net pre-sales than expected. However, the cancelled units were sold in the subsequent quarter at a higher price which would reflect in the remaining year. Collection in 1Q was healthy at Rs7.1bn (31% yoy). Net leasing income was Rs348mn (27% yoy) in 1QFY27. The company completed the paper business sale transaction in Aug-26 (2QFY27), signed in Mar-25. The sale led to realization of Rs33bn (of the Rs35bn). Financial: In 1QFY27, revenue stood at Rs1889mn (30% yoy), EBITDA at -Rs553mn (vs -Rs399mn in 1QFY26). No major revenue recognition was seen in 1QFY27, nor is any major revenue recognition expected in FY27. Revenue recognition uptick is expected FY28 onward, with impending completion of both Niyaara Towers (Worli) and Phase-1 of Trimaya (North Bengaluru). Net debt stands at Rs34.38bn (Rs5.1bn yoy); impact of the paper business sale would be seen in the 2QFY27 balance sheet.
Business development to see uptick going forward
In Aug-26, the company signed a society redevelopment project with GDV of Rs26bn in Navi Mumbai. This is a JV project with Priyanka Group as its JV partner. With sale of the paper business concluding (deal size: Rs35bn, of which Rs33bn already received) and given large-GDV deals across Mumbai, Noida, Bengaluru, Gurugram, and Pune at an advanced stage, we expect to see BD GDV of >Rs150bn for the rest of the year. Although FY25-27E pre-sales were range-bound at ~Rs80bn, we expect pre-sales to see uptick FY28E onward and likely to reach Rs150bn by FY29E.
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