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Targeting INR200b pre-sales in FY24 vs. initial guidance of INR160b At the beginning of CY23, Prestige Estates (PEPL) was identified as our top pick for the year due to its robust launch pipeline, ensuring a significant expansion in the residential business. This not only offered visibility for growth but also alleviated concerns regarding leverage. PEPL’s pre-sales grew ~25% YoY in FY23 on a higher base and followed it up with another strong performance in 1HFY24 with bookings of INR110b. Management now aims to achieve pre-sales of INR200b in FY24 and seems on track to achieve its presales target of INR250b by FY26. The stock has outperformed its peers and realty index with 53% YTD return. While net debt has increased by INR25b since Sep’22 to INR65b as of Jun’23, driven by aggressive business development initiatives, the scale up in the residential segment will limit the rise in leverage, ensuring it remains at comfortable levels. We expect net debt to peak out at INR90b in FY25. We increase our TP to INR900 and reiterate our BUY rating. Key downside risks to our target price include (a) a slowdown in residential absorption, (b) inability to sign BD deals, and (c) execution delays in certain key commercial projects

Significant expansion on a higher base; on track for INR250b of presales by FY26

* PEPL has grown its pre-sales to INR129b in FY23 from INR55b in FY21. This growth can be attributed to the successful expansion into the Mumbai market and the consolidation of its leadership position in Bengaluru, where the company achieved bookings of ~INR80b.

* As highlighted in our top pick note, the company scaled up its launches in 1HFY24 to 19msf vs. 17msf in FY23. As a result, its bookings surged to INR110b in 1HFY24 and have achieved 85% of bookings reported in FY23,.

* With the upcoming large launches in Hyderabad, Chennai, and MMR, the management now expects to clock bookings of INR200b in FY24 vs. its initial guidance of INR160b.

* The company boasts a robust upcoming project pipeline of 60msf and when combined with its existing inventory, commands a GDV of ~INR530b. With an aggressive business development strategy, the company is steadily progressing toward its pre-sales target of INR250b by FY26, a goal it had outlined during its investor day presentation in Feb’23.

Impressive performance in new markets

* PEPL forayed into the Mumbai market in FY22 with the launch of Prestige City at Mulund and has gradually strengthened its presence in the city by acquiring six projects across various micro-markets. The GDV of these projects stands at INR220b.

* Mumbai’s contribution to overall sales has improved to 21% in FY23 from 7% in FY22 and it is now almost at par with a few large developers in the city despite being a new entrant. The share of Mumbai is set to improve further as the company plans to launch Prestige Nautilus and Ocean Tower in 2HFY24 

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