Buy Brigade Enterprises Ltd for the Target Rs 835 by Motilal Oswal Financial Services Ltd
Healthy performance in annuity segment Lukewarm presales, but expected to revive in the coming quarters
In 1QFY27, Brigade Enterprises’ (BRGD) presales declined by 5% YoY to INR10.6b (10% below estimate) and were mainly supported by sustenance sales. It plans to launch ~12msf in the next 12 months, of which 9.3msf is expected in FY27. One project in Mysuru has already been launched after 1Q with GDV worth INR3b. Consolidated collections rose 7% YoY to INR18.6b. CFO stood at INR3.5b, up 10% YoY. On the back of sustenance sales and new launches, we bake in a 16% CAGR in pre-sales over FY26-28E, reaching INR100b. Further, we have built in residential collections CAGR of 14% to INR72b during FY26-28E
Leasing to grow with new assets coming in
In 1QFY27, leasing revenue grew 9% YoY to INR3.3b, while EBITDA stood at INR2.3b with a margin of 70%. Portfolio occupancy stood at 89%. Retail footfalls increased by 11% YoY, with 35% YoY growth in retail sales. The company launched five commercial projects during the quarter with a combined area of ~4msf in Bengaluru and Hyderabad. It entered into a strategic partnership with Bain Capital to develop ~2msf of mixed-use project in Whitefield, Bengaluru. We bake in a 9% CAGR in lease rentals over FY26-28 to INR16b
Steady performance in hospitality portfolio
In 1QFY27, BHVL reported revenue growth of 3% YoY to INR1.4b, while EBITDA stood at INR450m. Portfolio ARR stood at INR7,241, up 7% YoY. Occupancy stood at 76%. BHVL currently has 1,604 keys; nine hotels with a total of 1,700 keys are under the planning stage.
P&L performance
In 1QFY27, revenue declined by 13% YoY to INR11.2b. EBITDA grew 12% YoY to INR3.6b, while EBITDA margin stood at 32.4%. Adj. PAT stood at INR1.6b, up 5% YoY. PAT margin stood at 14.1%. Net debt fell by INR600m QoQ to INR22.2b, while the net debt-to-equity ratio stood at 0.26x.
Valuation and view
BRGD has a strong launch pipeline in the coming quarters. The medium-term growth outlook remains healthy given the availability of land bank and forthcoming BD. Annuity portfolio is expected to sharply ramp up in the next 4- 5 years on the back of recent launches, which would generate steady cash flows in the medium to long term. We value its residential business at NAV (WACC of 11.0%) and annuity assets at 7.5-8.5% cap rate. The stock is trading at ~60% discount to residential NAV and offers deep value. We reiterate our BUY rating with a TP of INR835, implying a 41% potential upside.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
