Buy Kolte Patil Developers Ltd For Target Rs.450 by Motilal Oswal Financial Services Ltd
Delays in launches impact bookings
Collection and realization improve
* Kolte Patil Developers (KPDL) reported pre-sales of INR6.8b in 3QFY25, down 9%/12% YoY/QoQ, (28% below estimate) due to delay in launches.
* Volumes also reduced 17%/21% YoY/QoQ to 0.8msf (28% below estimate).
* Realization increased 11%/12% YoY/QoQ to INR8.4b, due to higher realizations at the premium project ‘Canvas’ at Life Republic (LR) and 24K projects in Baner and Pimple Nilakh.
* Collections were up 15%/3% YoY/QoQ to INR5.7b (12% below estimate).
* According to its FY25 launch plan, KPDL could launch only 2.57msf, with an estimated GDV of INR20b, and planned launches may spill over to FY26 due to approval delays.
* The company reiterated its business development guidance of INR80b and expects a 25% CAGR in pre-sales over FY25-27 while FY25 to fall short.
* KPDL continues to increase its presence in Mumbai and Bangalore and targets to achieve a 30% contribution cumulatively from these cities, with the remaining 70% coming from Pune.
* It has a gross debt of INR1.2b and a net debt of INR5.5b.
* By the end of 9MFY25, KPDL had an operating cash flow of INR6.4b and a net surplus of INR7.68b
* P&L performance: For 3QFY25, revenue jumped 4.6x/13% YoY/QoQ to INR3.5b but came in 39% below our estimate. For 9MFY25, revenue was up 18% YoY to ~INR10b (49% of our FY25 revenue estimate).
* EBITDA of INR256m was up by 58% QoQ but was 65% below our estimate (vs a loss of INR367m in 3QFY24). EBITDA margin came in at 7.3% (vs. 5.2% in 2QFY25).
* PAT stood at INR253m vs. a net loss of INR629m in 3QFY24 (25% below our estimate).
* For 9MFY25, KPDL posted EBITDA of INR695m (up 20% YoY), while adjusted PAT declined to INR413m (vs a loss of INR422m in 9MFY24).
Key management commentary
* Demand: Demand stayed strong across its market of operations, and the income tax relief measures introduced in the budget are expected to positively influence demand generation.
* Business Development: A 22-acre JDA was recently signed in Wadgaon Khurd, Sinhagad Road, Pune (near Nanded City), with an anticipated GDV of INR40b and a total area of 5msf. The project is located in a prime market with well-established social infrastructure, upcoming IT parks, nearby malls, and easy access to the Mumbai-Pune-Bengaluru highway. The project is set to be launched within the next 8-10 months.
* Guidance: Management has reiterated its business development guidance of INR80b and expects a 25% CAGR in pre-sales over FY25-27.
* Profitability: KPDL expects to recognize ~INR18b in revenue in FY25 and would report a blended EBITDA margin of ~12.5%.
* KPDL’s margin threshold for outright acquisition deals is 25%-28%, and for JV/JDA/redevelopment projects, it is 16-18%.
* Launches: The launches of Laxmi Ratan Versova, Jal Mangal Deep Goregaon, Vishwakarma Nagar, and Jal Nidhi project, with overall GDV of INR20b from the Mumbai portfolio, have been pushed to FY26 due to approval delays.
* Unsold inventory currently stands at INR25b, with 3.5msf of area. Of this, Life Republic contributes ~INR10b, with an area of 1.6msf.
Valuation and view
* KPDL reported stagnant pre-sales for the last nine quarters. Further, with Mumbai launches shifting to FY26, we expect FY25 pre-sales to decline 12% to INR30.7b from INR34.9b estimated earlier, followed by a decline in collections by 5%. This, in turn, will also impact the recognition of revenues in FY26 by 4%, thereby affecting PAT by 6%.
* Yet, we expect the company to deliver a 19% CAGR in pre-sales over FY24-27.
* We also increase the discount to 20% to 1x NAV (earlier 15%) due to the spillover in targeted launches to FY26, leading to a revised TP of INR450 (INR525 earlier). We continue to reiterate our BUY rating with a potential upside of 52%.
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