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Strong launches + improving execution = Better CF

Our view

Sunteck Realty (SRIN) has achieved the presales of Rs19.5bn (20%y/y) for FY24 and guided 30-35% presales growth for FY25 on the back of a strong launch pipeline of Rs50- 55bn GDV. Company plans to launch subsequent phases of ODC, Naigaon, Mira Road and Vasai in FY25. Post the special development zone (SDZ) policy in place, Borivali project gathered pace and the company might bring it to the launch phase by FY26. Post leasing two assets at BKC junction, the company plans to build 5th Avenue at ODC in 3-4years, which can potentially generate annuity of Rs3bn and valued at Rs27.1bn with 25% discount. We have valued SRIN on SoTP with residentials valued on an NPV-based NAV approach, capturing all projects: completed (Rs8.6bn), under-construction (RS40.1bn), planned (RS16.2bn) and commercial (Rs37.2bn). Given that SRIN is aggressive on project acquisition, we have added BD of Rs7.1bn to valuation and maintained ‘BUY’ with an upgraded target price of Rs759/share.

SRIN’s another addition to commercial portfolio

SRIN has leased out its two assets at BKC junction i.e. Sunteck BKC51 & ICON for 29 years, yielding a rent of Rs300/sft/month with 4% escalation. These two assets are generating 30% returns on the invested capital and the company’s asset duo is cumulatively valued at Rs10.2bn. SRIN with the strong balance sheet is now planning to add another asset 5 th Avenue, ODC under the commercial segment. SRIN will build 5 th Avenue (~1msf) with the investment of Rs6-6.5bn and which is expected to yield rent of Rs250/sft/month resulting in a gross asset value of Rs42.9bn at 7% cap rate. After netting it with the capital invested and 25% discount, arrived at NAV of Rs27.1bn.

Presales growth of 30-35% easily achievable with strong pipeline

In FY24, SRIN added projects at the marquee Mumbai location i.e. Bandstand, Bandra, following the Nepean sea. Company clocked presales of Rs19.2bn with 20% y/y and aspires to achieve 30-35% presales growth for FY25 on the back of strong launch pipeline of GDV totaling to Rs50-55bn. Company plans to launch subsequent phases of ODC (Rs30bn), Mira Road (Rs8bn), Naigaon (Rs25bn) and Vasai (Rs10bn). Additionally, gearing up to launch its newly acquired Nepean Sea project by Q1FY26. SRIN has sold Rs2.45bn inventory in BKC projects and expects sales momentum to continue in FY25 as well and should contribute meaningfully to the sales.

Steadily improving execution/turnaround timeline

SRIN has an unparalleled track of acquiring projects which is backed by the strong and lean B/S. Company has acquired GDV of Rs300bn in less than three years and plans to repeat the same in coming years. While the company is acquiring projects at a fast pace it also needs to reduce the time to bring the projects to execution phase to redeploy the capital for BD without putting pressure on B/S. Internally the company is targeting 8-12months from acquisition to launch time which can be clearly visible from the status of Nepean Sea projects. With the launch plan across the year, the company is steadily scaling its execution capability.

Strong cashflow visibility and lean B/S allows to accelerate growth

SRIN received OC for Maxx World in the end of FY24 resulting in spillover of cashflow in H1FY25 and with execution of the ongoing projects there is strong visibility of cashflow for coming years. Moreover, the company has only Rs2.95bn gross debt (gross D/E 0.09x) while net cash of Rs80mn for FY24, allows the company to acquire projects at better pace without putting pressure on B/S.

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