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Healthy performance aided by luxury sales

Targeting 30-35% bookings growth in FY25

* Sunteck Realty (Sunteck) reported pre-sales of INR6.8b in 4QFY24, up 26%/ 51% YoY/QoQ (29% above our estimate). In FY24, it achieved bookings of INR19.2b, up 20% YoY, with an embedded EBITDA margin of 35%.

* Pre-sales in FY24 were slightly lower than the guidance of INR20b due to a delay in the new tower launch at the Mira Road project. However, Sunteck remains confident in delivering 30-35% bookings growth in FY25.

* In 4QFY24, Sunteck posted 10% YoY decline in collections at INR3b. For FY24, collections were flat at INR12.4b and adjusted for proceeds from the treasury stake sale, collections dipped 24% YoY to INR9.6b. The decline can be attributed to lower inflows from new projects such as Mira Road and Vasai, where it posted healthy sales but the pace of construction has not picked up.

* In FY24, the Uber luxury projects at BKC generated sales of INR2.4b (up 3x YoY), which were higher than cumulative bookings achieved in the last three years. The upper mid-income projects recorded a 19% YoY decline in bookings to INR10b. However, the lower mid-income projects posted strong bookings of INR4.8b, up 118% YoY.

* Aided by robust surplus cash generation of INR4b, Sunteck has become net debt free, and it intends to redeploy the surplus to further strengthen its project pipeline.

* P&L performance: Revenue surged ~9x YoY to INR4.3b, but was 29% below our estimate on account of partial revenue recognition of Phase 2 (Maxx World) at Naigaon. It reported an EBITDA of INR1.5b vs. a loss of INR91m in 4QFY23. EBITDA margin came in at 36%. PAT stood at INR1b vs. a net loss of 279m in 4QFY23. In FY24, revenue/EBITDA/PAT stood at INR5.6b/ INR1.2b/INR0.7b, a sharp improvement compared to its FY23 performance.

Key management commentary

* Launches: Sunteck is aiming to launch the Napean Sea and Bandra projects in FY25, and these projects have a combined GDV of INR30b. Additionally, the subsequent phases of Mira Road, Naigaon, and ODC will also be launched in FY25. These projects have a cumulative GDV of ~INR50b (Mira Road – INR8b, Naigaon – INR10b, and ODC – INR30b).

*  Guidance: Management is expecting 30-35% pre-sales growth in FY25 and it is confident of achieving it even if the launch of Napean Sea gets delayed.

* Business development: The surplus cash generation has been robust at INR4b in FY24, which will be redeployed in building commercial assets and BD for residential business. Sunteck has commenced planning of an office tower at ODC, and it will soon share the construction timelines. In residential, it is aggressively looking for new projects in the Western Suburbs/South Mumbai and will hopefully sign a few large deals in FY25.

* P&L Performance: Management expects further improvement as revenue from Avenue 4 (ODC) and Maxx World, along with BKC projects, will be recognized in FY25.

Valuation and view

* We expect Sunteck to deliver a healthy 30% pre-sales CAGR over FY24-26, fueled by a ramp-up in launches from both new and existing projects. 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 its future project additions through the IFC platform to arrive at our TP of INR640, indicating 36% upside potential.

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