Buy Aditya Birla Real Estate Ltd for the Target Rs 1,960 by Motilal Oswal Financial Services Ltd
New project addition improves growth visibility Tepid performance in 1Q, but on expected lines
Aditya Birla Real Estate (ABREL) reported pre-sales of INR3.3b in 1QFY27 (down 22% YoY, broadly in line), primarily due to the absence of new launches during the quarter. Birla Taranya (Thane) made a notable contribution worth INR1.3b, accounting for ~38% of quarterly sales. Pune contributed 36% to 1Q pre-sales, with cumulative bookings of INR1.2b, aided by continued sales at Birla Punya P2 and Birla Evam. ABREL terminated a couple of bookings in Birla Niyaara and one in Birla Arika in 1Q; these are likely to be resold at higher rates (the company has also demonstrated the ability to re-sell at higher rates in the past quarters).
Adds a new project in MMR; launch pipeline strengthens
ABREL has entered the Navi Mumbai micro-market with the acquisition of a new redevelopment project in Vashi, offering a GDV potential of INR26b (ABREL’s revenue share at 90%). This project is expected to be launched in FY28, and the company aims for INR100-150b GDV addition in FY27, which would enhance growth visibility over the medium term. For FY27, the company has a launch pipeline of six projects (three in MMR, one in NCR, and two in Pune) with a combined GDV of INR96b, which is likely to support pre-sales. Beyond FY27, the company has eight projects in its pipeline with a GDV of INR325b (excluding the Vashi project). We maintain our pre-sales CAGR of 10% to INR99b during FY26-28E.
Paper division sale complete; balance sheet to turn almost net cash
In 1QFY27, collections stood at INR7.1b, up 31% YoY, while the NOCF was INR520m. Net debt increased INR2b QoQ to ~INR34b. The sale and transfer of the Century Pulp and Paper division to ITC was concluded in Aug’26, with the proceeds expected to be received in 2Q (pre-tax CF of INR35b; received INR33.3b till now). Based on pre-sales growth and project execution, we expect a 30% CAGR in collections to INR56b during FY26-28E. Additionally, with the proceeds from Paper division sale, we expect the balance sheet to turn almost net cash in the coming quarter. Balance sheet strength would support upcoming BD activity.
Valuation and view
* BD activity has resumed with the acquisition of the Vashi project, with projects worth INR100-150b in GDV expected to be added in FY27. The Paper division sale was concluded in 2QFY27, which should help deleverage the balance sheet and release management bandwidth, enabling greater focus on real estate development. We value the residential business at its NAV, while assigning a NAV premium would depend on a sustained revival in BD.
* The focus on ramping up the annuity portfolio is positive and should provide greater cash flow stability post FY30.
* We reiterate a BUY rating with a TP of INR1,960, implying a 40% upside potential.
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