Attractive outlook; launches and pre-sales to drive stock trajectory; ‘Buy’ maintained
Sunteck Realty (SRL) clocked robust new sales of ~Rs 6 bn in Q4FY20 (up 110% y-o-y, 87% q-o-q); however, the pandemic dragged Q1FY21 bookings to ~Rs 1 bn (down 46% y-o-y). Mgmt indicated they are witnessing good buyer interest in completed/nearly complete inventory in the ODC/Borivali projects; the Naigaon project continues to do well. SRL is focused on project completions and portfolio expansion while keeping leverage low (ODC commercial projects stand deferred). We believe launches/pre-sales will determine the stock trajectory. Maintain Buy with a revised TP of Rs 263 (Rs 268 earlier) while rolling forward the valuation to September 2021e.
Pandemic hurt bookings in Q1FY21: Launch of the Naigaon Phase II project resulted in robust pre-sales in Q4FY20; this was somewhat countered by the cancellation of one unit worth ~Rs 0.8 bn in the BKC project. Covid-19 and the accompanying lockdown led to muted sales in Q1FY21 (down 83% sequentially).
Cash flow management assumes importance: Economic uncertainty has led to mgmt deferring the annuity project in ODC. SRL is focusing on: (i) project execution—the pace of work is expected to reach pre-Covid-19 levels by next month; and (ii) project addition in asset-light mode.
Outlook: Attractive—As our earlier report expounded, RERA-driven consolidation bodes well for SRL given its low gearing, which provides room to leverage its balance sheet and capitalise on attractive land purchase opportunities to grow its NAV. We remain positive on the company’s long-term prospects and maintain ‘BUY/SP’.