Buy Prestige Estates Projects Ltd For Target Rs. 1,865 By Axis Securities Ltd
Investment Rationale
* Launches led to pick-up in sales; Strong guidance: In Q4FY25, the company launched projects totalling 14 Mn sq. ft., including two major projects, Prestige Southern Star and Prestige Spring Heights, each covering ~5 Mn sq. ft. as compared to ~10 Mn sq. ft. in 9MFY25. Its presales for FY25 stood at Rs 17,000 Cr, missing its earlier guidance of Rs ~24,000 Cr but in line with our expectations post Q3FY25. Prestige has guided towards a launch pipeline of GDV Rs 42,000 Cr while having an unsold inventory of Rs ~20,000 Cr. It has also guided towards a presales of Rs 27,000 Cr, of which Q1FY26 is expected to contribute ~Rs 12,000 Cr on the back of the recent three Mumbai launches. This shows a good upcoming FY26 on the back of spill-over launches and a lower base.
* Robust Annuity Performance: The company showed an occupancy level of ~90% for its office segments and a strong 99% for its retail presence. EBITDA margins stood at 79%, leading to a rise in EBITDA from the annuity space of Rs 5,932 Cr for FY25. The exit rentals for its commercial/retail portfolio stood at Rs 5,230 Cr/ Rs 2,185 Cr. The upcoming pipeline stands at 8/10 Mn sq. ft. for commercial/retail segments. Its annuity capex stood at ~Rs 13,460 Cr, up from ~Rs 12,800 Cr. Prestige sees exit rentals escalating from the current Rs 7,400 Cr to Rs 44,000 Cr by FY29E.
* Collections recovery in coming quarters: While the company saw decent pre-sales despite delayed launches, its collections remained subdued. The reported collections for Q4FY25 of Rs 3,155 Cr showed 9% de-growth YoY. This was mainly impacted due to launches happening at the far end of Mar’25, and hence could not translate into collections. Prestige expects this spill over to happen in Q1FY26. The collections for the year stood at Rs 12,084 Cr, flat YoY.
Valuation & Analyst recommendation:
* Prestige aims to offset the muted FY25 performance in FY26E, with a robust launch pipeline of Rs 42,000 Cr combined with an existing inventory base of Rs 21,000 Cr. We believe Prestige is well-positioned to achieve a 65% YoY growth in pre-sales to Rs 28,000 Cr. We recommend a BUY rating on the stock with a TP of Rs 1,865/share, implying an upside of 10% from the CMP.
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