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Project launches to boost presales growth

Sunteck Realty (SRIN) is on a project acquisition spree with an aim of doubling its GDV every three years, guided by healthy cash flow generation. The company has adopted an asset-light strategy to maintain a lean balance sheet while accelerating execution. Its in-house construction management ensures control over the pace and quality of product delivery. Guided by a strong launch pipeline, the company’s presales are expected to achieve a 24% CAGR over FY25-27E, while its collection and operating cash flow will post a CAGR of 57% and 79%, respectively. We have confidence in SRIN’s growth visibility; hence, we reiterate our BUY rating with a revised TP of INR561/share.

Presales to achieve 24% CAGR, guided by high-value launches

* SRIN is one of the leading real estate developers in MMR, with a diverse presence across the South & Central, Western, and Eastern suburbs. The company has developed several notable projects, including Sunteck Signature (BKC), Sunteck City (Goregaon), and Sunteck West World (Naigaon), further solidifying its position in the market.

* Over the years, SRIN has acquired 11 projects with a total GDV of INR398b. During FY21-24, the company launched six projects with GDV of INR266b and achieved a 23% CAGR in pre-sales. Additionally, in FY25, the company reported pre-sales of INR25.3b, up 32% YoY, which indicates consistent growth. 1QFY26 also saw 31% YoY growth in presales, aided by a strong contribution from uber-luxury and premium luxury projects.

* From 2Q-4QFY26, SRIN plans to launch projects with a total GDV of INR110b, including a new phase of Sunteck City ODC in Goregaon East (INR15b; ~0.5msf in one tower), Sunteck Beach Residences in Vasai (INR5-6b), Sunteck Skypark in Mira Road (INR10b), a project in Bandra West (INR10b), Sunteck World in Naigaon (INR5b), a newly added redevelopment in Andheri (INR11b), and the remaining portion of the Nepean Sea Road project (INR54b).

* The company has been selected as the preferred developer for the redevelopment of a new residential project located in Andheri, near the Western Express Highway (WEH), Mumbai. The land parcel, spanning ~2.5 acres, offers a development potential of 0.28msf and is expected to generate a GDV of INR11b. SRIN will increase its total cumulative GDV target for FY26 to INR500b from INR398b currently.

* With strong demand in the uber-luxury segment and upcoming launches in MMR and Dubai, SRIN’s presales are expected to reach INR39b by FY27E, reflecting a CAGR of 24% over FY25-27E. ? Additionally, the recent joint development platform with IFC for green housing projects is expected to enhance SRIN's growth prospects.

Adoption of low-risk, asset-light model for maximizing returns

* SRIN has been a pioneer in tapping into some of the lesser-explored markets of MMR, such as BKC, Goregaon, Naigaon, Vasai, and Kalyan. By introducing luxury/aspirational residential offerings in these areas, the company has significantly elevated the real estate landscape and transformed these locations into high-demand hubs for premium/aspirational living. Additionally, the company has expanded its reach beyond residential developments into the commercial segment, diversifying into office spaces and retail developments, thereby broadening its market presence and strengthening its brand.

* Since FY18, the company has strategically shifted from its initial model of outright land purchases to a more asset-light approach. This transition involved entering into development management agreements (DMAs) and forming joint ventures (JVs) for project execution. This strategy has enabled SRIN to minimize capex while scaling up at a steady pace.

* By leveraging external partnerships and JVs, the company has achieved faster project execution and enhanced scalability across its developments. This approach has not only optimized the capital structure but also positioned the company to capitalize on growth opportunities with limited financial risk, making it a more agile player in the competitive luxury real estate market.

Aims to double the project pipeline within three years

* SRIN currently has sales potential of INR398b across its 11 existing projects at BKC, Goregaon, Naigaon, Vasai, Mira Road, Kalyan, and recently added Nepean Sea Road, Bandra West and Dubai.

* The company aims to double its potential over the next three years, building on the more-than-double growth achieved in the past three years. It targets adding INR100b-150b worth of projects each year, partially by unlocking its existing project in Borivali and the remainder through new project additions.

* Under this strategy, the company has entered into an INR7.5b equity platform with IFC to develop 4-6 green housing projects, i.e., 12,000 affordable and midincome green housing units, with a couple of projects currently being evaluated under this initiative.

* The company’s robust balance sheet and strong cash flow generation enable it to capitalize on a healthy project addition pipeline and seize future growth opportunities.

Valuation and view

* We expect SRIN to deliver a healthy 24% presales CAGR over FY25-27E, fueled by a ramp-up in launches from both new and existing projects. Further, its sound balance sheet and strong cash flows would spur project additions and drive sustainable growth.

* We value its residential segment based on the NPV of existing pipelines and its commercial segment based on an 8% cap rate on FY26E EBITDA.

* We reiterate our BUY rating on the stock with a revised TP of INR561, implying a 43% upside potential.

Strong collections to drive 60% revenue CAGR

* We project a 57% CAGR in collections to INR31b over FY25-27E, which is likely to drive a 60% CAGR in revenue to INR22b by FY27E. This growth is expected to be supported by revenue recognition from key projects at Naigaon, Goregaon, and Vasai, along with incremental sales from completed BKC inventory. The combination of strong collection momentum and steady execution positions the company for a significant financial scale-up over the next two years.

* This substantial revenue expansion is anticipated to drive a 59% CAGR in EBITDA during FY25-27E to INR4.6b, with an EBITDA margin of 22%. Adjusted PAT is expected to reach INR3.8b at a 59% CAGR over FY25-27E, with a profit margin of 18%.

Asset-light model helps to turn the balance sheet positive faster; OCF to surge 3x

* Net debt in 1QFY26 stood at INR0.7b. SRIN’s asset-light model enables it to accelerate growth and achieve a net cash position more rapidly, with the net cash surplus projected to rise to INR1.8b in FY27E.

* The company also maintains a solid, lean balance sheet with OCF projected to see a 79% CAGR over FY25-27 to INR12b as we expect collections to clock a 57% CAGR during FY25-27E with the completion of projects.

Scaling up rental revenue to expand margins going forwar

* SRIN is expanding its footprint in the commercial space by adding three assets to its portfolio. ? Sunteck BKC 51 and Sunteck Icon have been pre-leased for a 29-year tenure and are expected to generate an annual average rental income of INR700m. * Further, the company is in the process of commissioning another asset at Sunteck City in Goregaon under the name 5th Avenue, which is expected to generate an annual rental income of INR2.5b.

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