Maintain ‘buy’ on Sunteck Realty but revise target price to R401 from R443 earlier. We continue to like Sunteck given its high transparency of NAV – the BKC and Goregaon projects account for 75% of the NAV. Furthermore, over past two quarters, Sunteck has been booking 45-50%-plus ebitda margins in P&L which indicates the true profit potential of its key projects – Signature Island, Isles, Pearl at BKC versus just 30% in Q4FY14, which was slightly disappointing.
Our target reflects incorporation of net debt and customer advances as on December, roll forward NAV to March 2016e from September 2016e earlier, lower cost of capital of 15.5% versus 16% earlier, factor in revised cost for land, TDR etc, particularly in the Goregaon projects, and push-back in time lines across various projects.
Sunteck’s Q3FY15 sales of R14,200 crore were up 12% y-o-y, the highest in the last two years. Forthcoming/recent launches provide comfort that the pace should sustain over the next few quarters. Construction approvals for Signia High (Borivali) have been received and the project is launched. Signia Pride and Signia Orion are expected to be launched in Q4FY15.
The company’s cash flows remain healthy. Collection of R12,300 crore was comfortably ahead of construction spend (R6,500 crore) in Q3FY15, similar to trends seen in prior quarters.
Citi
