Buy Anant Raj Ltd For Target Rs.1,085 by Motilal Oswal Financial Services Ltd
Navya-4 and Floors to launch in 4Q
Data Center’s 22MW IT load on track to be commissioned by FY25-end
* P&L performance – In 3QFY25, revenue came in at INR5.3b, up 36%/4% YoY/QoQ (50% above the estimate).
* EBITDA was at INR1.3b, up 48%/18% YoY/QoQ (50% below the estimate), driven by higher total expenditure of INR4b vs estimated INR1b. EBITDA margin stood at 25%, up 2% YoY but ~50% below the estimate.
* Adj PAT was at INR1.1b, up 54%/5% YoY/QoQ (31% below the estimate). PAT margin was at 21%, up 2% YoY but ~24% below the estimate.
* In 9MFY25, Revenue came in at INR15.2b, up 46% YoY.
* EBITDA was at INR3.5b, up 52% YoY. EBITDA margin was at 23%, up 1% YoY.
* Adj PAT was at INR3.1b, up 68% YoY. PAT margin was at 20%, up 2% YoY.
Key highlights from the result presentation
* ARCP continues to make significant progress in reducing its debt. Its net debt ending Q3FY25 stood at INR540m vs INR960m in Q2FY25.
* Data Center Expansion – The 6MW IT load data center at Manesar is now operational, with an additional 15MW at Manesar and 7MW at Panchkula on track. This will bring the total capacity under development to 22MW IT load capacity by the end of FY25.
* ARCP successfully launched Ashok Cloud, Bharat’s own sovereign cloud platform, with a 0.5MW IT load in collaboration with Orange Business. The platform initially offers Infrastructure as a Service (IaaS). With plans to expand cloud infrastructure, including IaaS and colocation services, the company remains well-positioned to capitalize on the growing demand for data centers, data localization, and India's under-penetrated data infrastructure market.
* Construction of The Estate Residences (Group Housing 1) and Aashray 2 in Tirupati has already commenced and is progressing rapidly, remaining on track for timely delivery.
* Construction of Birla Navya Phase 1 has been completed, while building plans for Birla Navya Phase 4 have been approved. The RERA application has been submitted, and the project is expected to be launched in Q4FY25.
* The new version of Independent Floors, branded as The Estate Apartments, is in the advanced stages of launch in Q4FY25. The sample apartment is ready, and soft discussions are already underway in the market.
* The approval process for the recently acquired 11.35 acres is in its advanced stage, with the Letter of Intent for land conversion already received.
Valuation and view
* ARCP’s residential segment is expected to deliver 14msf over FY25-30, generating a cumulative NOPAT of INR75.3b.
* The residential business cash flow, discounted at an 11.6% WACC with a 5% terminal growth rate, accounts for INR2.5b in annual business development expenses, yielding a GAV of INR130b, or INR380/share.
* The annuity business cash flow is discounted at a capitalization rate of 8.5%, valuing it at INR13b or INR38/share.
* We expect ARCP’s DC revenue to grow materially, with capacity increasing from 6 MW in FY24 to 307 MW by FY32, along with a shift towards cloud services, which will expand from 0.5 MW to 77 MW over the same period.
* We model the free cash flows for the data center business till FY32, using a discount rate of 11.6%, a rental escalation of 3%, and a terminal growth rate of 3%, resulting in an EV of INR200b or INR585/share.
* We reiterate our BUY rating with the revised TP of INR1,085 based on our SOTPbased valuation.
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