Strong portfolio of ongoing and planned development projects located in attractive south Indian property markets with robust Bangalore market fundamentals and preference for organised players post RERA should aid Brigade Enterprises’ (BEL) well-balanced portfolio and currently in the process of developing 30 million square feet across seven cities over the next five years. As per management statement in annual report of FY17, Brigade will be launching 11.53 million sq ft during the FY18. This will comprise of 5.02 million sq ft of real estate space, 5.76 million sq ft of commercial space and 0.13 million sq ft of hospitality space.
BEL entered into an MoU with Intercontinental Hotels to initially set up 10 Holiday Inn Express hotels out of total 20 hotel properties planned across by 2020. BEL has a diverse and mature portfolio of real estate, lease rental and hospitality businesses and successfully expanded footprints beyond Bengaluru & Mysuru to other high-growth potential cities like Chennai, Hyderabad, Kochi and GIFT City Gujarat. It has an in-house, fully integrated property development team comprising engineers and architects who oversee the development of properties from inception to completion. Its land bank strategy includes outright purchase of land parcels as well as entering into joint development. Its product mix consist of premium residential apartments, mixed use developments and affordable homes.
Brigade’s September quarter sales were up 8% y-o-y to `484 crore and PAT was up 38% y-o-y to `41.62 crore. The company plans to increase focus on hospitality and leasing business and is expected to improve its sales with diversified portfolio. Brigade highlighted the fact that sales for Q2FY18 were slow because of RERA-related compliance. Going forward sales are expected to pick up from Q4FY18, as Brigade is launching 2.4 m sq ft under both residential and commercial project, 2mn sq ft of commercial-lease project and building 0.43 m sq ft of two IBIS Hotels in the second half of FY 17- 18. Our conservative SOTP valuation for Brigade comes to `350/ share considering projects that have visibility over next year. We have ‘accumulate’ rating on this stock.
Arihant Capital Markets