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Building a war chest for growth

Brigade Enterprises has been beefing up its land reserves so far in YTDFY24 with three large land acquisitions (one each in Hyderabad, Chennai and Bengaluru) having a cumulative estimated GDV of INR53bn. With a residential launch pipeline of ~8msf over the 12 months, we model for residential sales bookings of INR45.8bn in FY24E and INR51.3bn in FY25E. Further, we expect the company to clock rental NOI CAGR of 16% over FY22-25E to INR6.2bn led by lease-up of vacant space in Tech Gardens, Bengaluru and Brigade Twin Towers project becoming fully operational in FY25E. We estimate the company to clock hotel EBITDA of INR1.4bn in FY24E and INR1.6bn in FY25E with the hotel portfolio capable of clocking INR1.8bn of stabilised annual EBITDA beyond FY25E. We retain our BUY rating with an unchanged target price of INR695/share based on 1x FY24E NAV. Key risks are weakness in office leasing and slowdown in residential demand.

Robust launch pipeline and land bank additions to spur growth

Q1FY24 saw BRGD clocking sales bookings of 1.5msf worth INR10.0bn, which rose 22% YoY in value terms. We model for residential sales bookings of INR45.8bn in FY24E and INR51.3bn in FY25E driven by a residential launch pipeline of ~8msf over next 12 months. The company has recently acquired ~10acre land parcel in Kokapet, Hyderabad for INR7bn (including stamp duty) with potential saleable area of 3.5msf with a launch slated for H2FY25. Given the current residential prices of INR8,000-10,000/psf for premium projects in that micro-market, this project may have potential estimated GDV of INR35bn against which it may generate pre-tax operating surplus of ~25%. Apart from this, the company has acquired a 6.5acres of land in Sholinganallur, Chennai having estimated GDV of INR10bn and a 5 acre land parcel in North Bengaluru having estimated GDV of INR8bn.

Leasing traction to see gradual improvement 

While the company now has 100% occupancy in non-SEZ space, the Tech Gardens and World Trade Centre, Chennai projects continue to see higher vacancies owing to delay in SEZ de-notification policy. The company continues to target 100% occupancy at a portfolio level by Mar’24 (84% currently). We expect the company to clock rental NOI CAGR of 16% over FY22-25E to INR6.2bn led by up lease-up of vacant space in Tech Gardens, Bengaluru and Brigade Twin Towers office project becoming fully operational in FY25E.

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