Buy Prestige Estates Projects Ltd for the Target Rs. 2,295 by Motilal Oswal Financial Services Ltd
Robust 1H launch propels presales beyond FY25 milestone
Stellar business development of INR331b in 1H
* Presales: PEPL reported 50% YoY growth and 50% QoQ decline in presales to INR60.2b (52% beat) in 2QFY26, boosted by stellar launches in NCR and Bengaluru. In 1HFY26, presales jumped 157% YoY to INR181b, surpassing the total FY25 presales.
* Area volume: Total area sold during the quarter was 4.4msf, up 47% YoY but down 54% QoQ (42% beat). In 1H, total area volume was 14msf, up 138% YoY and higher than the total area sold in full-year FY25.
* Geographical contribution of presales: In 2Q, BGLR/NCR/MMR/HYD/CHEN/ Others contributed 40%/18%/22%/11%/7%/2% to presales. In 1H, these regions contributed 27%/45%/16%/7%/4%/1%.
* Realization: 2Q realizations stood at INR13,614 psf, up 2% YoY/7% QoQ (7% above our estimate). In 1H, they were at INR12,988 psf, up 8% YoY.
* Launches: Prestige launched four residential projects totaling 3.87msf with a GDV of INR39.6b in 2Q. With this, 1H launches stood at 18.81msf with a GDV of INR175.9b.
* Collections: PEPL's collections rose 14% YoY to INR38.9b (14% above our estimates) in 2Q. In 1H, they stood at INR81b, up 55% YoY.
* Net debt: In 2Q, net debt was INR73.2b, with a net debt-to-equity ratio of 0.45x (vs. net debt of INR68b with a net debt-to-equity ratio of 0.42x as of 1QFY26). The average borrowing cost was 9.61%.
* Business development: In 1H, the company acquired 266 acres of land with a GDV of INR331b across Hyderabad, Bengaluru, Chennai, Mysore, and Mumbai.
* Completions: The company successfully completed two residential projects in 2Q, spanning a total of 2.53msf. Overall, in 1H, the company completed 7.99msf of projects.
* Pipeline: GDV of upcoming launches stands at INR272b. For underconstruction and upcoming office projects, pending capex amounts to INR104b, while retail projects have INR43b in pending capex.
* Office: Total area leased in 2Q was 2.3msf. Occupancy levels remained robust at 93.4%. Exit rentals for FY26 is expected to be INR8.3b.
* Retail: Gross turnover (GTO) across malls was recorded at INR6.2b, up 9% YoY. Occupancy levels remained strong at 99%. Exit rentals for FY26 is expected to be INR2.7b.
* P&L: 2Q revenue grew 6% YoY/5% QoQ to INR24.3b (13% below estimate). In 1H, revenue stood at INR47.4b, up 14% YoY.
* EBITDA came in at INR9.1b in 2Q, up 44% YoY/2% QoQ (21% above our estimate), with an EBITDA margin of 37%. In 1H, it stood at INR18b, up 26% YoY, with a margin of 38%.
* PEPL reported an adjusted PAT of INR4.3b, up 124% YoY/47% QoQ (42% above estimate), with a margin of 18%. In 1H, it stood at INR7.2b, up 70% YoY, with a margin of 15%.
Key highlights from the management commentary
* Launched ~18.8msf across eight projects in 1HFY26 with GDV of INR176b, contributing ~63% of presales.
* FY26 presales guidance at INR270b, with 67% achieved; remaining launches worth INR272b GDV planned for 2H.
* Added 12 projects (8 JDAs, 4 owned) with GDV of INR331b across key cities; major Thane project to close soon.
* Signed MoU with Maharashtra Government to invest INR125b, including a large data center in Taloja (INR50b).
* Stock in hand stood at 14.09msf valued at INR199b across major cities.
* Net debt rose to INR73.2b with a net D/E of 0.45x and lower borrowing cost of 9.61%.
* Completed 8msf in 1HFY26, with 2.53msf delivered in 2QFY26.
Valuation and view
* As the company advances its growth trajectory in both residential and commercial segments and unlocks value from its hospitality segment, we believe the stock is set for further re-rating. Reiterate BUY with a revised TP of INR2,295 (earlier INR2,038) indicating a 30% upside potential.
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