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Debt levels remain the key monitorable

Prestige Estates Projects’ (Prestige) residential sales bookings remain strong and we model for gross sales bookings of INR150bn in FY24E and INR165bn in FY25E vs. INR129bn in FY23 led by high-value Mumbai launches. At the same time, the company’s consolidated net debt levels have risen by INR25.6bn over the last 12 months as it continues to incur annual land/stake buyout spend of INR40-50bn and annual annuity capex of INR30-40bn. We expect the company’s net debt levels to rise further to INR84.4bn by Mar’24. With gross incremental pending capex of over INR150bn for annuity assets as of Jun’23, the company’s ability to achieve significant pre-leasing in ongoing/upcoming annuity assets will be the key monitorable going forward.

While we retain our target price of INR611/share based on 1x FY24E NAV, we cut our rating to HOLD from ADD post the 8% run-up in stock price in last 3 months. Key upside risk is strong leasing in under construction annuity projects while key downside risk is residential demand slowdown.

Strong start to FY24, healthy launch pipeline

After a stellar FY23 when the company achieved gross sales bookings of INR129bn on the back of 16.5msf of new residential launches, Q1FY24 gross sales bookings were impressive at INR39.1bn (up 30% YoY) driven by new launches of 3.1msf and ongoing project inventory sales. For the remainder of FY24 and FY25, the company plans to cumulatively launch 65msf of residential projects (32msf in FY24E and 30msf in FY25E). It aspires to double annual residential sales bookings over FY23-26E to INR250bn with Mumbai market sales targeted to grow to INR50bn in FY26E (gross GDV of current Mumbai projects is INR419bn, as per the company) and new markets of the NCR and Pune to grow to INR30bn and INR15bn annually, respectively. Major launches slated for FY24E include Park Grove (GDV of INR70bn), Noida residential (GDV of INR45bn), Pallava Gardens, Chennai (GDV of INR45bn), Prestige City, Hyderabad (GDV of INR70bn) and two luxury Mumbai launches of Ocean Towers, Marine Drive and Nautilus, Worli (GDV of INR150bn).

Debt levels a key monitorable

While the company’s residential sales bookings remain strong, consolidated net debt levels have risen by INR25.6bn over the last 12 months as the company continues to incur annual land/stake buyout spend of INR40-50bn and annual annuity capex of INR30-40bn. We expect the company’s net debt levels to rise further to INR84.4bn by Mar’24, and with gross incremental pending capex of over INR150bn for annuity assets, the company’s ability to achieve significant pre-leasing in ongoing/upcoming annuity assets along with strata sales will be the key monitorable going forward.

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