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Pre-sales up 46% YoY in FY24; gearing up for strong pipeline in FY25

* Brigade Enterprise (BEL) reported pre-sales of INR22.4b, up 51% YoY/47% QoQ and 49% above estimate, driven by the launch of 1.3msf of projects and strong traction in ongoing projects during the sustenance phase. With that, FY24 bookings jumped to over INR60b, up 46% YoY.

* Sales volume was up 15% YoY in 4QFY24 to 2.72msf, while realizations were up 31% YoY to ~INR8250/sqft. For FY24, volumes stood at 7.5msf, up 19% YoY and realizations rose 23% YoY to ~8,000/sqft.

* The company is aiming to launch 12.6msf of projects with GDV value of ~INR130b across the three markets of Bengaluru, Chennai, and Hyderabad. With scale-up in Chennai and Hyderabad, we expect the company to deliver 32% CAGR in pre-sales over FY24-26E to INR105b.

* Total collections grew 26% YoY to INR18.4b, which led to 35% rise in OCF to INR5.9b. Full-year collections were up 9% YoY to INR59b and generated OCF of INR15.7b, up 4% YoY. Net debt (at BEL share) was down INR2b QoQ to INR19b, leading to D/E of 0.6x

* P&L performance: On the back of 1.3msf of completions, revenue and EBITDA doubled YoY to INR17b/INR4.3b, respectively. EBITDA margins were up 140bp YoY to 25.4%. Adj. PAT jumped four-fold to INR2.1b. For FY24, revenue was up 42% YoY to INR49b and clocked EBITDA of INR12b at margin of 24.4% and PAT of INR4.5b. Commercial portfolio about fully leased; hospitality growth intact

* Leasing revenue grew 32% YoY, but was flat QoQ at INR2.5b; EBITDA was up 39% YoY to INR1.7b due to 400bp expansion in margin to 71%. For FY24, leasing income stood at INR9.4b (up 25% YoY) and generated EBITDA of INR6.8b.

* Commercial occupancy increased to 97% (including hard option) and is about fully leased out. BEL currently has ~1msf of office and retail assets under-construction and aims to launch 3msf of commercial project over the next 12 months.

* Momentum in the hospitality segment remained intact; occupancy further increased 200bp QoQ to 75%; however, ARR was flat YoY at INR7,000. Revenues were up 12% YoY to 1.3b and EBITDA rose 18% YoY to INR0.46b. FY24 revenue stood at INR4.6b with an EBITDA of INR1.7b at a margin of 36%.

Highlights from the management commentary

* New launches: Of the 12.6msf new launches, 7.5msf is planned in Bengaluru, 3msf in Chennai, and 2msf in Hyderabad. BEL generated ~INR55b of bookings from Bengaluru and it can grow at a steady pace in the near term.

* Annuity portfolio: Office demand is expected to be robust in FY25, driven by medium and large-sized tenants, dominated by automobile, technology, manufacturing, and engineering sectors. The rental income can grow by 15-16% YoY and reach INR7b by the end of FY25 and at full occupancy, the portfolio can generate income of INR7.5b (including GIC’s share).

* Hospitality: ARR grew 8% in FY24 and it can further grow 10% in FY25, coupled with marginal improvement in occupancy. The expansion plans include a Grand Hyatt resort in Chaai, 2 Marriott, and 1 IHG brand asset in Bengaluru and 1 intercontinental hotel in Hyderabad.

Valuation and view

* BEL reported better-than-expected performance across key operational parameters. It also increased its 12-month forward launch pipeline by ~2msf, as a result, we raise our FY25/FY26 pre-sales estimates by 19/25%.

* Management highlighted its intent to keep assessing growth opportunities in the residential segment and expects to spend higher on business development over the next two years. This will provide growth visibility in the residential segment and lead to further re-rating. We hence increase the value of the residential segment in our SOTP to INR240b from INR200b earlier, but keep the value of commercial and hospitality segment unchanged.

* Our TP revises to INR1,500 (vs. INR1250 earlier), implying a 21% upside potential. We reiterate our BUY rating on the stock

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