Buy Sunteck Realty Ltd for the Target Rs. 540 by Motilal Oswal Financial Services Ltd
Presales guidance achieved; FY26 to witness strong launches
The uber-luxury segment drives sales
* Sunteck Realty (SRIN) reported presales of INR8.7b in 4QFY25, up 28% YoY (41% above estimates). Traction in uber-luxury projects increased 36% QoQ, with bookings of INR5.7b, or 66% of total presales. The upper-middleincome segment accounted for 27% of presales (+8% QoQ).
* During FY25, the company achieved presales of INR25.3b (up 32% YoY), fueled by the strong traction in uber-luxury and upper mid-income projects. SRIN surpassed its total presales guidance for FY25 (INR25b).
* Collections grew 5% YoY to INR3.1b in 4QFY25. FY25 collections stood at INR12.6b (+2% YoY). Collection efficiency stood at 50%.
* The company remains debt-free and reported a net cash surplus of INR1.3b as of 4QFY25 end. It intends to utilize the surplus cash to further strengthen its project pipeline.
* P&L performance: 4Q revenue fell 52% YoY to INR2.1b (56% below our estimate) as the company only recognized revenue from the Naigaon and BKC projects. SRIN reported EBITDA of INR687m, down 55% YoY (50% below estimate). EBITDA margin came in at 33.3% (up 3.4pp QoQ). Adj. PAT stood at INR504m, down 50% YoY (39% below our estimate).
* For FY25, revenue surged 51% YoY to INR8.5b (23% below estimate). EBITDA came in at INR1.9b, up 58% YoY (27% below estimate). EBITDA margin was 22% (up 1pp YoY). Adj. PAT stood at INR1.5b, up 2.1x YoY (18% below our estimate).
Key concall highlights
* Of the presales of INR8.7b, 66% were driven by the uber-luxury segment (INR5.7b), in which INR1.5b was contributed by BKC and INR4.2b via the Nepean Sea project.
* Guidance on presales and revenue: Aided by the strong launch pipeline, management guided for presales growth of 25-30% in FY26. This growth will be driven by the uber-luxury and premium-luxury segments. In FY26, more projects will come up for revenue recognition such as Sunteck City – 4 th Avenue, as the project has received occupation certificate.
* Launch pipeline: In FY26, SRIN will launch a new phase of ODC (Goregaon West), with a GDV of INR30b (two towers with 0.8-1.0msf area, of which ~0.5msf in one tower to be launched). SRIN will also launch the Beach Residences with a GDV of ~INR2.5-3b along with Sunteck Skypark in Mira Road, with a GDV of ~INR6-7b. The project in Bandra West (having a GDV of INR10b) and the Burj Khalifa Community, Dubai (with a GDV of INR90b), would be launched by the end of FY26 or early FY27.
* Dubai: The project will have only two towers with a total area of 1msf. SRIN plans to sell it in 3-4 years following the launch as guided by management.
* Business development: No new land acquisition took place in 4QFY25. In 3QFY25, SRIN added the Nepean Sea project-2 with a total GDV of INR24b, which translated into a total GDV of INR54b. This is expected to be launched in FY26. Cumulative GDV as of FY25 stood at ~INR394b.
* SRIN does not intend to compromise on margins for acquisitions, and most acquisitions are expected to be skewed toward the uber-luxury segment, given the strong demand.
* SRIN has started construction of commercial in Avenue 5. Average annual rental income is expected at INR2.5b. The commissioning timeline remains intact, which is by the end of FY27.
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 INR540 (vs. earlier TP of INR746), implying a 35% upside potential.
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