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Growth trajectory on track; reiterate BUY

FY24 expected to end on a high note; will clock pre-sales of INR19-20b

*  In 9MFY24, Sunteck reported pre-sales of INR12.4b, up 16% YoY, largely on the back of pick-up in bookings at its uber-luxury projects in BKC as well as its aspirational project in Naigaon.

*  In 3QFY24, Sunteck launched an aspirational project in Kalyan, unveiling a tower with a saleable value of INR3-3.5b. Within just a month, INR0.7b or 20-25% of the total value, was booked. This contributed seven ppts to the overall performance for 9MFY24.

*  The contribution from Kalyan is expected to increase as 4Q will witness the first full quarter of operation. Additionally, the company plans to launch a third tower at Mira Road, with a GDV potential of INR5-6b. This is expected to receive strong response on the back of healthy traction in the first two towers.

*  That, coupled with sustained traction at existing projects, will lead to bookings of INR6.5-7.5b in 4QFY24, taking the full-year sales to INR19-20b, up 20-25% YoY, and in line with management guidance.

Aiming to double project pipeline within three years

*  Sunteck currently has INR270b of inventory across its six existing projects at BKC, Goregaon, Naigaon, Vasai, Mira road, and Kalyan, which will increase to INR300b with the launch of Nepean sea road project in FY25.

*  Sunteck aims to double this inventory to INR600b over the next three years with a target to add INR100b worth of projects every year, partially by unlocking existing projects at Borivali and Dubai and the rest from new project additions.

*  Under that strategy, the company recently forayed into Bandra micromarket by acquiring a redevelopment project with GDV of INR5-7b. A couple of more redevelopment projects in the vicinity are under discussion. The company is also considering an adjacent land parcel at Nepean sea road project.

*  Additionally, it has entered into a INR7.5b equity platform with IFC to develop 12,000 affordable and mid-income green housing units and onetwo projects are currently being evaluated under the project.

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

Well positioned to deliver 24% CAGR growth in bookings over FY24-26

*  Sunteck is gearing up with a strong launch pipeline beyond FY24 with INR53b of launches lined up across new and existing projects, which include new project launches at Nepean sea road and Bandra in 2HFY25 and new phases at Naigaon, Vasai, and Goregaon.

*  Thus, with a ramp-up in launches, we expect the company to deliver a 24% CAGR in pre-sales to INR31b through FY26.

Profitability to increase significantly

*  The company’s key projects such as Naigaon and ODC are set for phase-wise completion over FY24-26E. The P&L is expected to improve beginning 4QFY24 with the delivery of the Maxx World project, which would contribute INR7.5-8b to the topline.

*  We expect revenue to register a CAGR of 47% over FY24-26E and EBITDA margin to gradually improve to 24-27%, resulting in 60% CAGR over the same period.

*  Consequently, PAT is expected to improve significantly to INR3.3b in FY26 vs. INR15m reported in FY23.

Valuation and view

*  Sunteck has a strong project pipeline and ramp-up in launches from both new and existing projects will drive bookings growth in the near term. Further, its sound balance sheet, strong cash flows, and recent partnership with IFC 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 FY25E EBITDA. We also assign INR14b of value to future project additions through the IFC platform to arrive at our TP of INR640, indicating a 33% upside potential.

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