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Growth plans gain visibility Approvals remain on track to meet FY27 guidance

Brigade Enterprises (BRGD) has a launch pipeline of ~9.4msf in FY27 (GDV ~INR100-110b). Of this, it recently launched ~2msf in Hyderabad, with a GDV of INR27b (ahead of schedule) and ~0.5msf in Mysuru, with a GDV of INR3b. These launches would support its pre-sales in 2QFY27. Approvals for the ~7msf of projects planned in 2HFY27 remain largely on track and BRGD has retained its INR90b pre-sales guidance for FY27. Currently, we retain our pre-sales estimates conservatively at INR84b for FY27.

Scale enhances post-leadership transition; diversification likely

BRGD clocked a 24% pre-sales CAGR during FY19-26 to INR74b despite delays in a few launches in the last two years. Following the leadership transition post-FY22, the company has scaled up, with residential launches in the range of ~5-9msf during FY23-26 vs. 3-5msf pre-FY23. While the FY27 launches are largely on track, the remaining launch pipeline of 32.5msf in the residential segment beyond FY27 is likely to support growth over the medium term. We expect a pre-sales CAGR of 16% over FY26-28E, reaching INR100b. Its recent foray into Coimbatore and probable diversification to a new city/region would de-risk its operations over the medium term.

Annuity portfolio to sharply ramp up in the next 5-6 years

Rental portfolio sharply ramped up from 2.4msf in FY18 to 9.4msf in FY26. This led to an annuity revenue CAGR of 21%, reaching INR13b over FY18-26. With ~4msf of commercial projects launched in 1QFY27, the company now has 7.15msf under development and another ~4msf is expected to be launched in the next 1-2 years. Consequently, the operational portfolio is expected to grow 2.2x to ~21msf by FY34-35. Over the next two years, some of the smaller assets would be operational while rental escalations across the operational portfolio would lead to a 9% CAGR in lease rentals over FY26-28 to INR16b. Given the significant area being operationalized beyond FY28, we anticipate rental income to double in the next 5-6 years.

Robust residential cash flow visibility of ~INR560b

BRGD has a track record of timely collections with 70-75% collection efficiency (as % of pre-sales) in the residential segment. This segment witnessed a collection CAGR of 19% to INR75b during FY19-26. It has total collections visibility of ~INR560b from the residential portfolio (launched inventory + upcoming launches). Backed by pre-sales growth as well as healthy project execution, we anticipate a 14% CAGR in residential collections to reach INR72b over FY26-28. The strong cash flow visibility would keep the balance sheet strong, while enabling BRGD to explore more avenues of growth via land acquisition in the residential business and capex in the annuity portfolio.

Valuation and view

BRGD’s medium-term growth outlook remains healthy given the availability of land bank and forthcoming BD. The 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 a 7.5-8.5% cap rate. The stock is trading at ~40% discount to its residential NAV and offers deep value. We reiterate our BUY rating with a TP of INR900, implying a 29% potential upside.

We tweak our construction cost estimates in the residential portfolio which has led to an increase in the TP. We have yet to factor in the going-concern valuation for the residential business from the expected forthcoming BD, leaving enough room for further upside. BRGD remains our top pick in the SMID space.

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