Buy Kolte Patil Developers Ltd for the Target Rs 545 by Motilal Oswal Financial Services Ltd
Strong collections and new project additions
In 1QFY27, Kolte-Patil Developers (KPDL) reported flat pre-sales YoY at ~INR6.2b, which came in 6% below expectations. Life Republic project contributed ~34% of pre-sales, while the rest of the Pune region contributed ~36% of pre-sales as two projects with GDV of INR5.4b were launched in the region. MMR contributed ~30% of quarterly pre-sales. KPDL’s pre-sales have remained in the range of INR26-29b over the last three years. Given the new BD pipeline, healthy demand and the realignment of focus on operations with the Blackstone deal largely completed, We expect presales CAGR of 17% to INR36b in FY26-28E.
Strong BD in MMR enhances growth visibility vs. diversification
On the BD front, KPDL acquired six redevelopment projects across MMR with an aggregate GDV of INR60b (~2msf saleable area) in FY27. These were across several micro-markets, including Santacruz, Andheri, Oshiwara, Versova, Ghatkopar and Vashi. Overall, it has 5.6msf of ongoing and unsold projects and 6.7msf is under approval across various projects, of which ~88% is in Pune. It also has availability of an additional land bank admeasuring ~25.8msf in Pune and Mumbai, building a strong launch pipeline. The aggregate development potential of 38msf offers an estimated GDV of ~INR344b, which provides comfortable visibility on pre-sales growth over the medium term. The recent new project acquisitions in MMR would provide avenues for diversification in the coming years.
Strong collections; healthy balance sheet
Despite flat pre-sales YoY, collections grew by 30% YoY to ~INR7.2b in 1Q, which is encouraging. In 1QFY27, KPDL generated NOCF of INR2.1b with NOCF-to-collections ratio of ~30%, which is broadly in line with the FY26 performance. Further, it has net cash of INR4.2b (including zero coupon bonds, net debt stands at INR0.5b). On the back of pre-sales growth and project execution in the next two years, we expect collection CAGR of 18% to INR37.7b in FY26-28E. We expect net debt at INR2.1b/INR2.0b in FY27/28E.
Valuation and view
* Pre-sales have been sluggish in the last three years and are expected to revive in FY27-28 as the new BD in MMR region provides KPDL with a healthy launch pipeline. Collections have remained strong despite muted presales, and hence, we expect the balance sheet to remain sturdy as progress in execution remains healthy.
* We value the business on DCF basis. We arrive at a gross asset value of INR50.5b. After adjusting net debt, we arrive at NAV of INR48.4b. The additional value in NAV is from the recent project acquisitions in MMR. Accordingly, our TP has increased to INR545, indicating a potential upside of 18%. We reiterate BUY on KPDL.
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
