Sunteck Realty (SRL) clocked Rs 3.5 bn in pre-sales in Q3FY22 (up 29% q-o-q/flat y-o-y). We believe this is a reasonable performance considering no project launches during the quarter. 9MFY22 sales at ~Rs 8 bn are up 23% y-o-y. Collections during Q3FY22 rose 7% y-o-y/30% q-o-q to Rs 2.7 bn. We expect a higher sales trajectory for SRL going ahead with the housing cycle likely turning, sustained expansion in project portfolio (~23msf added over the last 18 months), potential launch of the Vasai project and an additional tower/phase in Naigaon. Maintain ‘Buy’ with a TP of Rs 592/share (on a par with NAV of Rs 592).
Decent performance: The company released some new inventory in the ODC project during the quarter. 9MFY22 collections at ~Rs 6.5 bn are up 41% y-o-y (FY21 collections were at ~Rs 7.8 bn). We expect collections’ trajectory to remain strong, aided by SRL’s strong execution track record.
New launches, cash flows and debt remain key variables: Launch of new projects is critical to boosting the sales momentum going ahead, in our view. We expect the launch of the Vasai project and the Naigaon Phase 3 project over the next couple of quarters and the Borivali and Kalyan projects by CY22 end. We also believe SRL’s focus on cash flow management should keep its balance sheet healthy going ahead.
Outlook: New launches key – We like SRL’s diversified presence in the Mumbai Metropolitan Region (MMR) and robust execution capabilities. Revival in housing demand and SRL’s focus on cash flows should hold it in good stead. The company’s low gearing provides room to leverage its balance sheet and capitalise on attractive land purchase opportunities to grow its NAV. Maintain ‘BUY/SN’.