12 February 2015
3QFY15 Results Update | Sector: Real Estate
Indiabulls Real Estate
BSE SENSEX
28,805
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val,INRm/Vol ‘000
Free float (%)
Financials & Valuation (INR b)
Y/E Mar
Net Sales
EBITDA
NP
EPS (INR)
2015E 2016E 2017E
26.4
6.5
1.8
4.6
28.1
8.3
3.3
8.1
77.3
167.3
4.6
6.4
9.0
0.5
30.9
10.4
4.7
11.6
43.7
171.7
6.4
8.0
6.6
0.4
n
n
S&P CNX
8,712
IBREL IN
381.5
29.3/0.5
109/45
7/-5/17
109/45
62.3
n
CMP: INR77
n
TP: INR105 (+36%)
continues;
Buy
operational
Margin disappoints; pre-sales sub-normality
improvement remains key to re-rating
EPS Gr. (%) -22.2
BV/Sh INR 163.3
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2.7
5.2
16.0
0.5
Estimate change
TP change
Rating change
8-10%
10%
n
Revenue in line, margin disappoints:
Indiabulls Real Estate (IBREL) recorded
revenue of INR6.5b, +45% YoY (in-line) in 3QFY15, with continuation of revenue
contribution from Blu. However, margin fails to improve (23.9%, down 1pp QoQ),
with initial round of Blu revenue from lower realizations. EBITDA stood at INR1.6b,
39% YoY, while PAT stood at INR788m (v/s est. of INR697m) led by higher other
income (contributed by forex gain and small asset sales) and lower tax.
Pre-sales muted on NCR drag:
IBREL’s both operating markets, Mumbai and
Gurgaon, have been performing subnormal. Total pre-sales in 3Q stood at 0.3msqft
(INR5.2b) v/s 0.4msqft (INR4b) in 2Q and estimate of INR4.5b. Blu (Worli) remains
a major contributor, 85%+ pre-sales mix. Gurgaon launch (One Indiabulls) was
subdued with no incremental net pre-sales, along with Panvel project, which
witnessed reversal of pre-sales. The premium project at Kalina (0.22,
~INR25,000/sqft) is under immediate launch plan, while London is expected to
commence monetization by FY16.
Gearing up on Thane land acquisitions and weaker collections:
Consolidated net
debt stood at INR53.4b (+INR2.5b QoQ), 0.71x. This was largely driven by INR2.4b
of outgo towards acquisition of 7.2 acres of land in Thane. Customer collections
were weak as well on account of cancellations in Savroli in the earlier quarter.
Lower pre-sales expectations:
We cut the annual pre-sales estimates for
FY16E/17E by ~10%/5% to factor the weaker outlook for NCR. However,
management interaction guides for an improvement in the execution pace at
Central Mumbai and Navi Mumbai (Panvel and Savroli) projects, with no major
approval uncertainty, which should drive monetization hereon.
Valuation and view:
IBREL trades at 0.5/0.4x FY16E/17E BV, a steep discount to
peers and own valuation history (0.75x average P/B). Recovery in operating cycle,
reduction in debt, revival of comfort in overseas project and potential buyback of
IPIT stake would be key near-to-medium term triggers for the stock. We value IBREL
at INR130 as we cut NAV by ~10% to factor the slower pre-sales schedule. We
arrive at a target price of INR105, 20% discount to NAV. Maintain
Buy
(36% upside).
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.