Neutral on HDIL as pre-sales improve again: JPMorgan

Published: November 19, 2014 1:40 AM

HDIL’s Q2 EPS of R1.4/share came in better than expectations aided by gains on the sale of multiplex business.

HDIL’s Q2 EPS of R1.4/share came in better than expectations aided by gains on the sale of multiplex business. On the operating front, pre-sales and collections improved further in Q2 and the company expects trends to improve further in H2.

The company has now secured approvals to launch the city’s largest mid-income housing township in Virar in Q4, wherein we expect a good initial response. The outlook for the Mumbai residential market seems to have improved with inquiries and absorption picking up over the last two quarters.

Share pledge on the company has been removed, thus removing a large overhang on the stock. We think if the company sticks to its FY15 guidance, i.e. debt reduction with increasing launches, the sharp discount to book value (63%) will start closing.

Pre-sales for the quarter at R330 crore were up 10% q-o-q and positive trends have continued in the festive months of Oct/Nov. The company expects H2 to be better than H1 as new launches come through in Ghatkopar and Virar. Additional phases of residential launches  are also planned in Kurla and Mulund. Collections for the quarter were also healthy at R340 crore.

Net debt in the quarter increased by R350 crore due to approvals/FSI-related payments for new projects and also for accelerating construction on ongoing projects. However, net debt as per the co is likely to start reducing henceforth.

By JPMorgan

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