Maintain ‘overweight’ on HDIL, price target Rs 140

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Published: December 25, 2015 12:13:09 AM

Maintain ‘overweight’ on HDIL with a March-2016 price target of R140 per share based on 8x cash ebitda and inline with the multiple used for other residential property developers.

Maintain ‘overweight’ on HDIL with a March-2016 price target of R140 per share based on 8x cash ebitda and inline with the multiple used for other residential property developers. HDIL is one of the cheapest stocks (P/B) in the sector. Debt concerns for HDIL have eased over the last three quarters. Cash generation from core operations has been improving. Progress on asset sales would be the key to watch for and would help sort the cash flow/ execution issues. Approvals for new launches are progressing well and the company has a good launch pipeline going into FY15.

HDIL has entered into an agreement with DK Realty to sell development rights for a land parcel in Kurla for R650 crore. This transaction will help the company cut its net debt by ~15% to R2,500 crore (net D/E -0.2x, net D/ebitda -3.5x), comfortably meeting its year-end net debt target of R2,500 crore. This asset sale was not built into our cash flow projections and hence is a positive. On an operating basis, the company has been doing well with pre-sales picking up over the last few quarters as well as driven by recent revival seen in the TDR segment.

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