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Pre-sales driven by Life Republic & 24K product

Approval delays might weigh on INR52b launches planned for 2HFY25

* Kolte Patil Developers (KPDL) reported pre-sales of INR7.7b in 2QFY25, up 22% YoY, guided by the strong sales momentum in Life Republic (50% of total sales) and 24K (28%). Volumes inched up 5% YoY to 1.03msf as presales were driven by the higher ticket size products. In 1HFY25, pre-sales stood at INR14.8b (11% YoY).

* As per its FY25 launch plan, KPDL could launch only 2.21msf with an estimated GDV of INR18b. It intends to launch another 5.76msf with an estimated GDV of INR52b in 2HFY25, subject to approvals.

* Pune contributed 95% or INR7.3b to total pre-sales (vs. 85% in Q1FY25) while MMR and Bengaluru’s contribution dropped to INR0.4b. Excluding LR, pre-sales from Pune sustained at INR3b per quarter, while LR’s contribution was INR3.9b for 2QFY25.

* Collections rose to 17% YoY at INR5.5b, leading to a two-fold jump in OCF to INR2b. KPDL spent INR1.5b on land and approval, resulting in a surplus of INR0.6b. Net cash as of Sept’24 stood at INR580m.

* We believe there might be approval delays that may weigh on targeted launches of INR52b for 2HFY25, and result in some spill over to FY26. Nonetheless, KPDL is expected to deliver 25% growth in FY25 to INR35b, as the management is confident to launch projects from the Pune pipeline.

* P&L performance: For 2QFY25, revenue jumped 56% YoY to INR3.1b but came in 39% below our estimate. For 1HFY25, revenue declined 16% YoY to INR6.5b (32% of our FY25 revenue estimate).

* EBITDA of INR162m was up by 365% YoY and lower by 42% QoQ. EBITDA margin came in at 5.2% (vs. 8.2% in 1QFY25).

* PAT stood at INR97m vs. a net loss of INR253m in 2QFY24.

* For 1HFY25, KPDL posted EBITDA of INR440m (down 54% YoY) and adjusted PAT declined 23% YoY to INR160m.

Key management commentary

* 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 EBITDA margin in the early teens. As a framework, the company targets GM of 26-27%, EBITDA of 17-18%, and PAT margin of 10- 11%.

* Launches: KPDL is hopeful of launching the Laxmi Ratan Versova, Jal Mangal Deep Goregaon, Vishwakarmanagar project from the Mumbai portfolio by the end of FY25.

* KPDL’s margin threshold while acquisition for outright deals is 25%, and 16- 18% for JV/JDA/redevelopment projects.

Valuation and view

* After a stagnant pre-sales performance for the last eight quarters, we expect KPDL to get back to its growth trajectory in 2HFY25, given the pick-up in launches and a strong pipeline. Further, with the upcoming project pipeline of INR250b, healthy growth should continue. We expect the company to deliver an 18% CAGR in pre-sales over FY24-27.

* We maintain FY25E pre-sales at INR35b but await further clarity on the progress on business development after a weak 1HFY25. There might be approval delays that may lead to a spill over of targeted launches to FY26, so we introduce a 15% discount to the 1x NAV, which leads to a reduction in our TP to INR525 (INR620 earlier). We continue to maintain our ‘BUY’ rating with a potential upside of 46%.

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