IGI Logo

Record year of pre-sales; traction to continue

Targeting 25% growth in bookings for FY25

* Prestige Estates Projects (PEPL) reported bookings of INR47b in 4QFY24, up 21% YoY (in line) aided by sustained demand across ongoing projects. In FY24, PEPL achieved record bookings of INR210b, up 63% YoY. Of these, ~INR155b came from new launches. In FY24, it also achieved the highest ever launches of 31msf in residential business with a GDV of INR210b.  

* Sales volume was flat at 4msf, and realization improved 18% YoY to INR11,400/sft. In FY24, volume grew 34% YoY, and realization was up 21% YoY to INR10,400/sft.

* The strong bookings traction is expected to continue in FY25 as PEPL has unveiled a launch pipeline of ~60msf with a GDV of INR600b. It is targeting a pre-sales of INR260b, implying an increase of 25% YoY.

* Total collections in 4Q increased 30% YoY/14% QoQ to INR41b, and the company generated an OCF of INR18b. It incurred a capex of INR6b in the annuity segment and spent INR19b towards land/TDR investments. Net debt increased INR8b sequentially to INR78b, with net D/E at 0.7x.

 * P&L performance: Revenue was down 18% YoY/up 21% QoQ to INR21.6b (in line), but EBITDA increased 21% YoY to INR8.3b, aided by ~12pp rise in EBITDA margin to 38%. Adj. PAT decreased 70% YoY to INR1.4b due to lower other income and higher finance costs. In FY24, revenue declined 5% YoY to INR79b, while EBITDA rose 20% YoY to INR25b. Adj. PAT was INR7.1b (flat YoY).  

Annuity income continues to scale up

*  PEPL reported rental income of INR1.3b, up 30% YoY, and EBITDA stood at INR0.8b with a margin of 58% (vs. 82% in 3QFY24). In FY24, rental income grew 86% YoY to INR5.4b, and EBITDA was up 119% YoY to INR3.8b. The company expects to achieve rental income of INR9b by the end of FY25.

* With 24msf of ongoing office and retail projects and an additional 14msf of upcoming projects, rental income is expected to rise to INR38b, once these projects are delivered by the end of FY28.

* Hospitality segment: Revenue grew 27% YoY to INR2.4b, and EBITDA came in at INR1b, up 20% YoY, with a margin of 41%. PEPL currently has an ongoing and upcoming portfolio of ~1,700 keys and the segment can generate steady-state revenue of INR25b.

 Key highlights from the management commentary  

* Guidance: Despite a higher base of INR210b, management is confident of achieving 25-30% growth (INR260b) in bookings in FY25, driven by a vast launch pipeline of INR600b. Timely launches can also enable it to comfortably exceed the guidance.  

* BD: The spending towards BD will continue to be at INR35-40b including pending land payments. The company has recently acquired a large project in Pune where it intends to build its flagship Prestige City project. It also has a strong BD pipeline in Hyderabad, Chennai, and NCR 

* ADIA Fund: The capital will be used to develop four large projects – one each in Bengaluru, Goa, Mumbai, and NCR. PEPL has so far received INR5b, which will be used to retire the debt in Ocean Towers project in Mumbai. The balance will be spent on acquiring land in Delhi and Goa, since Bengaluru and Mumbai projects are already tied up.

* Capex and leverage: PEPL expects to incur a capex of INR25-30b in FY25. However, given the significant scale-up in residential cash flows along with ADIA fund, management is confident of reducing the D/E by the end of FY25.

 Valuation and view

* The launch pipeline of INR600b has significantly improved the growth visibility in the near term, and with higher spending on BD, progress on project acquisitions is expected to continue, which will further strengthen its residential business. Additionally, as the company advances on its key commercial projects, further value creation is imminent.

* We raise our pre-sales by 8%/15% for FY25E/26E as we incorporate higher launches. Reiterate BUY with an increased TP of INR1,825, indicating a 21% upside potential.  

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412